Evli Emerging Frontier

Equity fund investing in rapidly growing developing economies

NAV
22.09.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
165.894 -9.97 -4.92 13.70 7.52 9.75
NAV
22.09.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
230.153 -9.97 -4.92 13.70 7.52 9.75
NAV
22.09.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
164.768 -9.34 -3.53 16.21 9.36 8.74

Risk

6/7

Morningstar

3/5

Recommended Investment Horizon

9 years or more

Administrative fees

1.90 % p.a.

+ the performance-based fee is 20% of the return figure determined in accordance with the fund rules. In order for the performance fee to be charged, the value of the fund unit series has to exceed its highest historical value and the return of the fund unit series has to exceed the hurdle rate of 8% calculated for each valuation date over the last 24 months.


Suitable for investors

  • investors who wish to benefit from economic growth in the emerging economies
  • investors who wish to benefit from the world’s fastest growing consumer markets
  • investors who seek high returns and can tolerate the risks associated with the emerging markets
  • as a part of a diversified investment portfolio due to the high risk level
  • who want to invest responsibly and take into account not only economic analysis but also environmental, social and good governance (ESG) factors.

Invest

min. 1 000 € or 50 €/month

Investment Policy

Evli Emerging Frontier Fund is an equity fund that invests its assets in the equities and equity-linked securities of companies operating in the emerging markets and in the frontier markets of the emerging economies. The fund’s geographical investment coverage consists of emerging economies or markets in Asia, Africa, Central Asia, the Middle East and Latin America. The fund may invest in derivatives contracts both for hedging purposes and as part of its investment strategy.

The fund’s investment strategy is active and is based on stock selection. Investments are made in consumer-focused companies with growing cash flow and low market valuations.

The strategy’s target markets are generally less known and less accessible for investors, while their economic growth is forecast to outperform that of the developed economies. This offers investors good diversification and an opportunity for high return.

 

The portfolio is managed by

Evli Fund Management Company

Investment Objective and Risks

The fund’s investment activities are aimed at maximizing the increase in the value of assets. The fund does not have an official benchmark index.

As the fund’s return expectation and risk level are high, we recommend the fund to experienced investors with long investment horizons. All the fund’s assets are invested in emerging economies’ equity markets, which means that the fund’s value may fluctuate abruptly within a short period as a result of the general performance of the target markets and exchange rate fluctuations. To minimize the fund’s risks, its investments are diversified extensively on a geographical basis and across different industries.

Monthly review

31.08.2022

In August, we added two Turkish companies to the fund, both trading at 3x forward P/E: a $400m exporter of granite tiles expecting to triple sales this year thanks to doubling production capacity, improving operational efficiency, and securing new contracts in Europe where its peers struggle to compete on price due to ever-increasing energy costs; and a $250m frozen and canned foods producer forecasting triple-digit growth on the back of increased local consumption of basic foods, recovery in tourism, and growth in exports; in both cases, we hedged our Turkish lira exposure. We also bought a $1.5b Saudi Arabian hospital chain whose CEO expects earnings to grow 4x this year, benefiting from the resurrected post-pandemic demand for non-urgent medical care.

We trimmed two stocks: a 3x LTM P/E South African paper and packaging producer whose European operations are facing energy-related cost increases, and a 5x LTM P/E Indonesian wooden business whose sales of building materials to the US declined as the demand for new homes dropped after the Fed increased interest rates.

We also sold two positions: a Philippine Internet provider which halved its year-end guidance amid weak new subscriptions and margins, and a Thai starch producer now expecting a softer second half of the year. Both traded at over 15x LTM P/E, and this deteriorating growth sentiment made valuations too expensive.

Fund facts

Type of fund Equity fund investing in emerging markets (UCITS)
Investment activity began 08.10.2013
Benchmark index No official benchmark index
Profit distribution Fund-units are divided into A and B units. Profit share of at least 4% is distributed on A units annually.

Responsibility and consideration of sustainability factors

Sustainability information in accordance with Articles 6 and 8 of the EU SFDR regulation 2019/2088 (sustainability‐related disclosures in the financial services sector).

The fund promotes environmental and social characteristics in accordance with Article 8 of the SFDR.

Sustainability risks are taken into account in investment decisions

When building and monitoring the fund’s investment portfolio, traditional financial and other key indicators, such as risk and valuation indicators, and also sustainability risks are taken into account in investment decisions. In addition to the analysis made in connection with investment decisions, the sustainability risk is managed with the exclusion of certain sectors and/or companies. When realized, material sustainability risks can affect the financial performance of the fund’s investment instruments, and therefore the fund’s return.

Excluding certain sectors and/or financial instruments from investment can reduce the fund’s sustainability risk. It can, however, increase the fund’s concentration risk. A potential increase in concentration risk, taken in isolation, may lead to greater volatility and increase the risk of loss.

Environmental and social characteristics

In addition to other characteristics, the fund promotes environmental and social characteristics in accordance with Evli's Principles for Responsible Investment and requires that target companies observe good governance.

The fund’s target companies are analyzed before an investment decision is made and at regular intervals during the investment period with regard to environmental, social and corporate governance matters, or ESG factors. ESG factors are integrated into the analysis of target companies and their selection for investment by the fund.

To the extent that information is available, company-specific ESG scores and their development, information on any UN Global Compact violations, companies’ reputation risk and carbon footprint, and the proportion of fossil reserves are monitored using databases produced by MSCI ESG Research and ISS ESG and other public sources. In addition, the sustainability analysis of target companies includes meetings with representatives of target companies and by collecting ESG data for the fund’s own database. In the meetings, an ESG survey is conducted to gather information related to sustainability. The survey has three sustainability themes: interaction with the environment and the community, the role of employees in the target company and compliance with good governance.

The fund’s carbon footprint and emission indicators are measured and monitored, and a regular scenario analysis is conducted to monitor the attainment of Evli's general climate targets. Evli's goal is to achieve carbon neutrality by 2050 at the latest, and it has set a target of a 50 percent reduction in indirect emissions from investments by 2030, provided that this is possible in the investment environment. The comparison year is 2019. The attainment of the climate targets will be measured using data from ISS ESG and MSCI ESG to monitor the fund’s carbon footprint and intensity, the degree of low-carbon transition, a scenario analysis in relation to the 1.5 degree warming target and the warming ratio associated with the fund.

The EU Taxonomy Regulation defines economic activities that are environmentally sustainable. In order for an economic activity to be considered environmentally sustainable under the EU Taxonomy Regulation it must not, in addition to contributing to one or more environmental objectives, cause significant harm to other environmental objectives mentioned in the Regulation. The “do no significant harm” principle applies only to those investments underlying the financial product that take into account the EU criteria for environmentally sustainable economic activities. The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities. The Fund is not committed to making sustainable investments in accordance with the EU Taxonomy Regulation.

Good governance policy

An assessment of the quality of corporate governance is an important part of the assessment of potential investments.

Evli's ownership control principles require that the companies it invests in engage in good governance by complying with the Finnish Corporate Governance Code issued by the Securities Market Association, for example, or corresponding foreign guidelines, which often impose a partial framework on the remuneration models of the invested companies. In addition, Evli’s Responsible Investment Team analyses the fund's investments every three months for any breaches of norms (UN Global Compact and OECD’s guidelines for multinational companies) to the extent that the relevant information is available on the target companies. The OECD's guidelines for multinational companies also cover disputes related to taxation. Consequently, such disputes may lead to the exclusion of an investment instrument.

ESG strategy

Various factors related to a company are taken into account when making investment decisions. ESG factors are a key part of risk analysis and investment decisions. Evli's Principles for Responsible Investment and Climate Change Principles establish a framework for its investment activities. Portfolio managers carry out analyses of the companies and their ESG-associated risks. The Responsible Investment Team supports the portfolio managers in their work, and Evli's Responsible Investment Steering Group makes decisions on the framework of responsible investment. Evli also has an internal ESG database which combines the responsibility data of the companies in which investments are made from various data sources.

Meeting with the management of each target company is an essential part of the implementation of the fund's ESG strategy. At these meetings, sustainability information on environmental, social and corporate factors is gathered from target companies.  As part of the ESG analysis, the target company's practices are compared with the best practices in the sector.

Our responsibility reporting comprises fund ESG reports, customer-specific ESG reports, and the Responsible Investment Annual Report. Evli also reports on the promotion of environmental and social characteristics in accordance with the SFDR as part of the mutual funds’ annual review.

The Principles for Responsible Investment, the Climate Change Principles and the exclusion consensus criteria apply to all direct investments made by the fund.

The fund can use derivatives or other strategies occasionally, regularly, extensively or not at all. Its key investor information document (KIID) includes information on how often and for what purpose derivatives are used. Such investments are not covered by ESG requirements. 

Evli’s Principles for Responsible Investment and exclusion

Evli's Principles for Responsible Investment define the basic standards for norm-based screening and exclusion of companies. Investments are regularly monitored with respect to the UN Global Compact principles to the extent that they are available. If the target company is found to violate the principles related to human rights, labor standards or the environment or actions against corruption as defined in the UN Global Compact initiative, Evli will engage with the company or exclude it from investments. In addition, target companies are analyzed for benchmark violations at the investment stage. On the basis of regular monitoring, Evli's Responsible Investment Team will take the necessary measures with respect to companies that are suspected of having violated international laws and regulations. Such companies can either be excluded directly or Evli can engage with them. If dialogue with a company fails or is deemed to be unhelpful, the company may be added to the exclusion list.

In accordance with Evli’s general exclusion principles, manufacturers of controversial weapons (landmines, cluster munitions, nuclear weapons, depleted uranium, chemical weapons and biological weapons) with a 0 percent revenue threshold, as well as tobacco manufacturers and producers of adult entertainment and companies involved in controversial lending (including so called pay-day lenders) with a 5 percent revenue threshold are excluded from the fund. In line with Evli's Climate Change Principles, the fund monitors the greenhouse gas emissions of its investments and avoids investing in companies in which at least 30 percent of revenue comes from extraction of thermal coal, use of thermal coal in energy production or the extraction of oil sands. This exclusion may be waived if the company has a clear plan to change its operations. In addition, companies producing peat for energy production are excluded.

In addition, in accordance with the fund's own exclusion principles, companies that have substantial business in the following areas: weapons and firearms, alcohol, tobacco, gambling and extraction, mining and refining of fossil fuels are excluded from target companies.

Benchmark index and fund responsibility profile

The fund does not have a benchmark index.

Read more about Evli's responsible investing

Downloadable files

Invest

min. 1 000 € or 50 €/month