Fund Profile

Barings Emerging EMEA Opportunities 29 September 2021


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Barings Emerging EMEA Opportunities. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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Barings Emerging EMEA Opportunities (BEMO) offers the potential for capital growth and income from a diverse region which has little representation in mainstream indices and funds. BEMO was known as Baring Emerging Europe until November 2020 and is run by the same team with the same strategy, but in a wider region with more varied drivers of growth, including both domestic and global themes.

Current key themes driving the portfolio include growing demand for the materials used for electric vehicles and the energy transition from fossil fuels, the growth of ecommerce from low bases in these very different markets, as well as local and regional emerging fintech leaders. These modern, secular trends are allied to the local growth of middle classes and consumption in Africa, Eastern Europe and the Middle East, a more traditional set of emerging market growth drivers (see the Portfolio section for a fuller explanation).

BEMO has been managed by Matthias Siller since 2008. He was joined by Maria Szczesna, with whom he has worked for over ten years, and Adnan El-Araby as co-managers in 2018. They have a strong track record of generating alpha in emerging Europe, as we discuss in the Performance section. They continue to look for high quality growth companies at attractive valuations within their wider mandate. The objective is to find quality companies from emerging Europe, the Middle East and Africa.

BEMO yields 3.2% on an historic basis. While Dividends were reduced in the 2020 financial year, the managers believe their new region offers the potential for attractive dividend growth from diverse income sources. The board can supplement the natural income on the portfolio with up to 1% of NAV per year from capital.

Kepler View

BEMO represents a highly differentiated proposition which we believe could offer attractive diversification to many investors. The global emerging markets index is dominated by north Asia, while the EMEA region makes up less than 10% of the index. As a result, investors are unlikely to have much exposure to these countries. However, they in general display high GDP growth potential, growing middle classes and good domestic growth stories which should be less correlated to global markets than the North Asian giants. In addition, the countries covered by BEMO’s mandate have contrasting economic and other characteristics; and this internal variety helps mitigate risks.

We think it may be underappreciated how plugged in some of the key companies in the region are to global themes too. In particular, investors wanting to play the transition away from fossil fuels have a broad opportunity set in the mining and clean energy companies in the region (including major oil producing countries, Russia and Saudi Arabia). The new universe has increased the number of opportunities exposed to this theme, while also opening up a wider collection of technology and ecommerce companies to the managers.

With the recent China sell-off and growing interest in ex-China ETFs (recently reported by the FT), we think this could be a good time to be considering diversifying into the trust. BEMO is now the only investment trust with a focus exclusively on EMEA, and benefits from the attractions of the structure, including the ability to smooth dividends via revenue and capital reserves. It also has a management team with a strong track record of generating alpha.

bull bear
Offers attractive diversification to the typical exposure of a global or global emerging markets trust
Political and liquidity risks can be higher in the smaller emerging markets
Diversifying source of income with dividend growth potential
The ongoing pandemic increases macroeconomic uncertainty
Managers have a strong track record of generating alpha and Barings is a major investor in the trust’s under-researched markets
High materials and energy exposure could make the trust vulnerable to a global recession
Continue to Portfolio

Fund History

29 Jul 2022 Fund Analysis
BEMO offers exposure to both sides of the energy transition…
27 Apr 2022 Finding value in a haystack
Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities…
25 Mar 2022 Slides and Audio: Barings Emerging EMEA Opportunities
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 16 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
23 Feb 2022 Regime change
Ahead of our spring conference, we ask whether investors need to junk their portfolios and start again…
26 Jan 2022 Fight or flight...
Two of our analysts debate the impact that war in Ukraine could have on investors' portfolios...
22 Dec 2021 No humbug
Our analysts look back at a year of predictions, theories and ideas, and highlight those they think could matter most…
08 Dec 2021 Results analysis: Barings Emerging EMEA Opportunities
BEMO has outperformed its benchmark and the emerging markets index in a barnstorming year for EMEA…
13 Oct 2021 Beyond the Middle Kingdom
As momentum falters in the emerging markets powerhouse, we examine the options for investors outside China...
29 Sep 2021 Fund Analysis
BEMO is a very different way to play the energy transition…
01 Sep 2021 Winter is coming
Summer was a welcome opportunity for exhausted investors to turn their backs on the legion threats they face, but they haven't gone away and the days grow short - we examine four in detail...
25 Aug 2021 Is the UK’s debt a ticking time bomb?
Our analyst argues Rishi is right to worry about government debt and borrowing…
28 May 2021 Results analysis: Barings Emerging EMEA Opportunities
Reporting results for the six months ending 31 March 2021, BEMO outlined the early success of the broadened investment strategy…
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: Barings Emerging EMEA Opportunities
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 02 March...
24 Feb 2021 Fund Analysis
BEMO is Barings Emerging Europe under a widened mandate offering greater alpha and dividend potential…
09 Dec 2020 A bumper harvest?
Agricultural and industrial commodities have rallied strongly, but what are the implications for emerging market allocations...?
13 Aug 2020 Underground bangers
We look for hidden gems in the smaller end of the investment trust universe...
24 Jun 2020 Fund Analysis
BEE’s portfolio’s cheap valuations and strong fundamentals make it a potential recovery play...
18 Jun 2020 Gimme shelter
As income investors brace for impact we ask which regions and trusts are less likely to cut their dividends in 2020…
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
18 Mar 2020 Their darkest hour?
We update our shortlist of discount opportunities...
16 Jan 2020 Drifting apart: how emerging markets have become less correlated
We examine how correlations between different emerging markets have evolved, and whether single country strategies could diversify returns going forward....
05 Dec 2019 Fund Analysis
BEE invests in strikingly cheap markets and has a strong track record of alpha and dividend generation…
06 Nov 2019 Times are a changin'? The case for a value resurgence
We are in the midst of the longest period of value underperformance since the 1920s. Could we be approaching a change in environment?
14 May 2019 Fund Analysis
Baring Emerging Europe offers a high dividend yield of 4.5% from its unique focus on a cheaply valued region ...
01 May 2019 Sweet or sour?
Three months in, we check up on the progress of our discount opportunities portfolio...
13 Feb 2019 Sweet treats
The eight trusts with strong prospects, but wide discounts...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
24 Dec 2018 Why did the chicken cross the road?
Because he was so bored of reading newspapers devoted entirely to Brexit he was hoping he’d be hit by a truck.
28 Nov 2018 Every cloud...
The endless grinding negativity of Brexit has driven investors away from Europe in scores, leaving rich pickings for opportunistic buyers...
10 Oct 2018 Information overload
Our analysis shows the long-term case for emerging markets remains largely unaffected by much of the negative newsflow surrounding the sector...
09 Oct 2018 Fund Analysis
Baring Emerging Europe offers capital growth and a dividend yield from a unique portfolio of stocks in developing Europe...
30 May 2018 Forza Italia!
Recent weeks have seen Italy's rocky relationship with the EU thrust into the spotlight once again, but we think volatility for European equities may be a buying opportunity...
22 Mar 2018 Fund Analysis
An unusual combination of high-alpha stockpicking, with a portfolio exhibiting strong growth credentials and decent dividend income
22 Mar 2018 The search for discounted yield
We scour the investment trust universe for trusts offering chunky yields on a discount...
30 Nov 2017 Race ready
Our analysis suggests conditions are right for emerging markets fund managers who can add real alpha to generate strong returns...
27 Sep 2017 Not the usual suspects...
As equity valuations continue to defy logic, we identify the trusts least correlated to their fortunes...
22 Sep 2017 Fund Analysis
Income from a growth portfolio - something for everyone?
26 Apr 2017 The greatest
We use technical analysis to identify some of the best stock picking fund managers in the world today...
16 Nov 2016 Fantastic income (where to find it)
We reveal the true extent of stock concentration among UK equity income funds and identify three trusts which offer a fantastic alternative...
12 Sep 2016 Fund Analysis
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