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Cash is king for fund managers focused in eastern Europe. August's collapse in Russia resulted in sharp falls for most regional markets. The Czech and Slovak markets, still inextricably linked for investors, outperformed Hungary and Poland because of the greater liquidity in the latter markets.

The Central European Val-ue Find, run by Advantage Advisers, has recently benefited from a 30% cash weighting following a sell-off for tax reasons. Mercury's Eastern European Fund, holds 18% in cash as a defensive measure and has focused its investments on EU convergence plays, with 75-80% committed to Central Europe.

The Baring Eastern Europe Fund and Emerging Europe Trust have cash weightings of 30% and 18% respectively. And the new Nicholas-Ap-plegate Emerging Europe Growth fund, is maintaining a high cash position of 35%.

Although most funds with a focus on Czech and Slovak stock appear to ignore Slovakia completely, regional funds do offer exposure to this market. For example, The Central European Growth Fund, a closed-ended UK domiciled fund, has almost a 5% weighting within its $163m of assets. Regent's Discover Europe Investments, a Cayman Islands open-ended fund, has 9.5% of its $27m invested in Slovakia.

Carl Spaengler's Osteuropa Index Trust, whose benchmark is the CECE Index (comprising the Visegrad markets, Hungary, Poland, Czech and Slovakia), has 6% in Slovakia, comprising seven stocks. Although it aims to match the portfolio with the structure of the index at a stock level, since the fund's inception in October last year, it has ignored two stocks in Slovakia due to their small size and poor liquidity. As a result, the weighting towards Slovakia has been controlled with reference to the overall market's weighting in the index.

Fleming's Czech and Slovak Investment Corporation has suffered from a shareholder vote for share buy-back by the company following recent performance. The fund has lagged the index, resulting largely from its ex-posure to direct investments. Richard Newell

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