East Capital Balkans

East Capital Balkans fund delivered a solid return of 5.48% in the fourth quarter of 2025. The performance was driven by gains in Austria (+31.8%), Hungary (+23.9%), and Romania (+11.7%), while Greece (+2.5%) and Turkey (+0.3%) were still laggards. 

Greece’s economic momentum continued. GDP grew by 2.0% YoY in 3Q25, supported by a strong acceleration in fixed capital investment. Residential construction grew 25.4% YoY, while private consumption was up 2.4% YoY. Supported by this macro backdrop, the Greek index gained 5.0% in the fourth quarter, bringing annual performance to +70.6%.  Titan Cement was the best performer in the Balkans portfolio for the quarter, with a 54.9% gain. The company is growing strongly, both organically and inorganically, and recently acquired Tracim Cement in Turkey for USD 190m. This investment will add more than USD 40m EBITDA, give Titan access to Istanbul’s ports for its US exports, and allow Titan to become a player in a potential reconstruction of Ukraine, given the geographic proximity of the acquisition. Growth stories like this, and the strong financial delivery from the company, have caught investors’ attention lately. Corporates aside, share performances from Greek banks were mixed in 4Q, with National Bank of Greece up 5.1%, Eurobank up 4.4%, Alpha Bank losing 0.9%, Piraeus down 5.8%, and Optima down 8.6%. Despite mixed performances in 4Q, Greek banks performed extremely well in 2025 in general and remain as key positions for us to invest in Greek recovery. We still see Optima bank as the fastest growing bank, with loan portfolio growth 3Q25 at 34% and a valuation at a similar P/E as the rest of the sector; 7-8x P/E for 2027, which we think is a significant undervaluation. Among the large Greek banks, we prefer Piraeus Bank, which is the cheapest, and we took significant profits in 4Q from names such as Alpha Bank, Eurobank, and National Bank of Greece. 

Turkey, after a prolonged and volatile adjustment period, started to show clearer signs of macro improvement towards the end of the year. Inflation started to moderate, with December CPI at 30.9% YoY (0.9% MoM), slightly below Central Bank of Turkey’s forecast range. Monetary easing continued, with the latest in December delivering a 150bps cut, bringing the policy rate to 38%. December also saw a minimum wage adjustment, announced at a 27% increase (200bps above expectations), which is deemed manageable and not expected to disrupt the disinflation process. Some of our picks in Turkey performed very well in 4Q, with seemingly better prospects on the macro level. Our portfolio gained on companies such as Coca Cola (+23.7%), Enerjisa (+10.1%), Medical Park (+9.8%), Enka (+9.0%), and Akbank (+7.2%), while the worst performers included Do&Co (-7.9%) and Logo (-11.5%). Despite their 4Q underperformance, it is worth noting that annual performance in the portfolio was good for both names – with the stocks up 29.3% and 14.6% respectively. We pick stocks stringently for Turkey, finding real growth companies with upsides related to the macro backdrop. The country was an underperformer in 2025, reflecting political uncertainty and a delayed recovery due to persistent inflation and a temporary pause in rate cuts earlier in the year. However, with inflation easing toward the end of 2025, and continued commitment to orthodox policies, we are increasingly constructive towards Turkey for 2026. Barring significant political disruptions, the market may prove to be a “dark horse” in the portfolio. But we will keep a very close eye on the political risk factors in the country. We expect disinflation (forecasting approx. 23% CPI at YE26) and further rate cuts (approx. 1,000 bps in 2026) to provide a supportive backdrop for equities. 

Aside from our largest country exposures, there were good performances elsewhere. Romanian MedLife was up by 31.3% in 4Q25. Meanwhile, in Austria, Raiffeisen was up by 30.5% and OTP Bank in Hungary was up by 22.3% in the quarter, reflecting peace hopes in Ukraine. In the Balkans fund, we are well positioned as of 4Q25 for potential peace in Ukraine, as we increased our positions in OTP Bank, Enka, and Raiffeisen. 

In December, we participated in the largest EE conference in Prague, where we met more than 70 companies from our investment universe, from countries including Greece, Turkey and Romania, and witnessed high interest levels from investors and positive sentiment towards equities in our investment universe. We share their views, as we expect a supportive macro backdrop combined with compelling valuations to result in re-ratings across the region. Despite its strong 2025 performance, Greece remains at a discount on EU and Emerging Markets - by 36% and 29% respectively, and Turkey may prove to be a surprise for investors this year, as economic recovery is now more tangible. 

To summarise, we closed the year with a strong performance, thanks to improving macro conditions in our key markets and our ability to seize tailwinds actively as they come. Looking ahead, we are well positioned to benefit from ongoing structural growth in Greece, a potential macro recovery in Turkey and peace in Ukraine, with key positions in quality names demonstrating strong fundamentals. East Capital Balkans Fund is trading at 8.7x P/E, with 9.9% y/y EPS growth and offering 4.7% dividend yield for 2026. Our portfolio remains focused on companies with robust balance sheets, sustainable earnings growth, and disciplined capital allocation. We continue to engage actively with management teams, monitor macro developments, and adjust our positioning to capture upside while managing downside risks. The Balkan region remains a compelling investment destination, offering diversification, attractive valuations, and long-term growth potential. 

Performance in USD net of fees.

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