Emerging Europe trades at discount

Emerging Europe region trades at around 50% discount to Europe, global emerging markets and MSCI ACWI. Although the regional performance has been strong over the past 12 months, earnings growth has kept up as well and the discount remains high. We expect a solution to the Ukraine-Russia war, once it happens, to close the gap significantly as investors who are today avoiding the region are expected to return.

Emerging Europe trades at discount

Avaron Emerging Europe Fund companies trade below historical levels

Our Fund portfolio trades at 7.7x 1YR FWD P/E assuming 9% earnings contraction for the companies this year. Higher valuation of the portfolio vs. benchmark stems from the fact that we do not hold any exposure in Turkey that accounts for 25% of the index and trades at 4.2x 1YR FWD P/E. Current valuation level is 23% below the long-term historical average. Non-financial companies in the portfolio are trading at 4.9x 1YR FWD EV/EBITDA, only marginally below the long-term average. The aggregate upside of the Fund on 2-year forward looking basis stands at 43%, on par with the long-term median level.

Avaron Emerging Europe Fund_graph

Avaron Emerging Europe Fund unit price vs upside

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