With a history reaching back almost 30 years, Raiffeisen-Osteuropa-Aktien is one of Raiffeisen Capital Management’s oldest equity funds. As in the beginning, it continues to represent one of the company’s core competencies: managing Eastern European equities. However, a lot has happened over the last three decades, and the fund is thus also shifting its focus and becoming more sustainable. Starting from August 2, 2023 it will be called Raiffeisen-Zentraleuropa-ESG-Aktien.

Raiffeisen-Zentraleuropa-ESG-Aktien: new country universe, better diversification

In the future, Raiffeisen-Zentraleuropa-ESG-Aktien will focus on the countries in Central Europe as well as Austria. It invests mainly in equities issued by companies which are domiciled or primarily active in Poland, Austria, Hungary, Czechia, Romania, Slovakia, Slovenia, Croatia, Lithuania, Latvia, and Estonia. This includes companies which are domiciled outside of these countries, but do a significant amount of their business in the region. The new structure allows for better, broader diversification of the fund assets. At the moment, the possible investment universe encompasses around 150 enterprises but only just under one half of them will be represented in the fund portfolio for the foreseeable future. Why?

Transition to a sustainable investment approach

When selecting equities, in the future ESG criteria will be applied, i.e. social aspects, environment topics, and the type of corporate governance will be taken into account in the investment decision. Efforts are being made to achieve a certain minimum ESG figure both for the individual companies themselves and for the fund as a whole (average value), which currently narrows the investment universe down to around 70 equities.

Additionally, the UN’s 17 Sustainable Development Goals are also taken into consideration. Fundamentally speaking, there is no investment in companies that are active in the arms industry, that violate labour or human rights, or that generate their revenue from the production or extraction of coal or from other coal-related services. This is supported by our long-standing expertise in sustainable investing and active dialogue with companies.

Central Europe: Growth region and important hub

Despite the economic disruption during the pandemic and subsequent war in Ukraine, as a region, Central and Eastern Europe (information on the Eastern European emerging economies) is on a solid growth trajectory, with rates of economic growth that are roughly twice as high as they are in the “old” EU countries. It continues to exhibit good, long-term growth potential. While the bridging function with Russia is no longer a factor right now, the region still has links to many countries in Asia, which have even strengthened with the recent events. Raiffeisen-Zentraleuropa-ESG-Aktien is focused on economically successful, politically stable countries. Thanks to this focus and the lack of investments in Russia and Türkiye, the fund’s performance may tend to show less volatility than in the past. While this is highly likely, it cannot be guaranteed of course.

Convergence still intact, with attractive valuations

The trend towards convergence remains fully intact, for instance with regard to the gradual approximation to Western European income levels. The region also profits strongly from the significant EU financial aid. The process of economic convergence will probably benefit the banking sector, consumer goods, infrastructure, and construction in particular. Equity valuations are at historically low levels (P/E ratio of around 7) and are far below the long-term average (> 11). To some degree of course, these lower valuations are due to higher risks, for example ones related to (geo-)political developments. At the same time, they also just partially reflect the promising risk-return profile in a region that tends to be overlooked and underestimated by international investors, and is simply waiting to be (re-)discovered.

The fund exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.The investment strategy permits the fund to predominantly (relative to the associated risk) invest in derivatives.