A mutual fund devoted exclusively to Baltic stocks finished first place among all funds in Sweden last year, giving investors a handsome 50 percent return on their investment.
The East Capital Baltic Fund, one of five funds managed by East Capital, a five-year-old asset management group based in Stockholm, beat out all other Swedish mutual funds by focusing on low-risk growth stocks in the three Baltic states.
The accomplishment marked the second year in a row East Capital beat out other investment managers, as its Russian Fund posted an astonishing 130 percent gain (in dollar terms) in 2001.
Moreover, East Capital has managed to consistently place one of its Sweden's top five funds in each of the five years of its existence.
Incredibly, the performance is continuing this year, as the Baltic Fund has grown 7.2 percent year-to-date while the Baltic Blue Chip Fund has grown 5.6 percent.
Peter Hakansson, manager of East Capital, said he believed the remarkable growth would continue since, in his opinion, Eastern Europe "will undergo the world's most exciting development over the next 10 years."
Furthermore, "many [East European] companies have the potential to double their current share prices without appearing overvalued," he added.
Generally, however, Hakansson said there was no secret to East Capital's investment success, as he and his investment team place an emphasis on regular company visits in order "to get to know the market and the people."
According to Hakansson, the most important thing is "knowing management."
Among East Capital's favorite Baltic stocks are Hansapank, Sneige, Norma and Merko. Norma, said Hakansson, is good for its exposure to Russia's market, while Merko is a "well-run" company.
In terms of portfolio turnover, Hakansson said that East Capital liked to buy stocks and sit on them, waiting for the markets and economy to do their work. "We're boring," he admitted.
The company sources shares from a variety of places but generally show a preference for shares listed on Western exchanges. This is particularly true for Russian stocks, which East Capital prefers to buy in the form of American Depository Receipts.
Though East Capital currently manages two Russian, two Baltic and one East European fund, the two Russian and two Baltic funds will merge into one fund for each respective area, said Hakansson. The appropriate paperwork has been filed with Swedish authorities and is awaiting approval.