Société Générale Emerging Europe Asset Management (SGEEAM), a wholly owned subsidiary of Société Générale, has launched the SG Convergence Fund, which will invest in equities of the ‘EU-5’.
The EU-5 – Poland, Hungary, the Czech Republic, Estonia and Slovenia – are already in advanced discussions with the European Commission to become members of the EU.
Richard Harding, SGEEAM’s managing director says: “We have taken the initiative by pioneering the concept of investing in the EU-5 countries while their valuations are relatively low. Our innovative Convergence Fund uses SGEEAM’s Emerging Europe expertise and excellent track record and packages it for institutional investors.”
SGEEAM manages specialist funds for institutional investors seeking exposure to economies that are developing rapidly. Its offer includes regional funds mainly invested in the quoted sector and closed-end funds focusing mainly on unquoted companies in specific countries.
“What we have been analysing for quite a long time is the way emerging markets are developing. We believe you can’t manage money without getting out there, visiting those countries and their companies. Our team spends a lot of time in the region, visiting more than 150 companies a year,”
As joining the EU implies structural and economic reform, the effect of moving towards membership is giving these countries a greater economic and currency stability. “We want investors to see that in meeting the Copenhagen criteria these countries are moving to free market and democracy, which will reduce investment risks,” Harding says. “Even if the EU-5 countries are not allowed to join the EU in two or three years, the efforts they are making in order to achieve this are improving their economies,” he adds.
Harding believes that investing in emerging market is a proven concept. “In states such as Spain, Portugal, Italy and Spain the effects of Maastricht and Emu were translated into economic improvement and very good investment returns,” he says. SGEEAM’s team thinks the success of southern European investments could be repeated in the EU-5 countries, whose convergent markets will diversify European portfolios and offer the potential for attractive returns.
The SG Convergence Fund will be a sub-fund of an open ended UCITS umbrella fund, listed in Dublin.