KD Balkans Fund: a very attractive investment opportunity

After the last financial crisis South Eastern European (‘SEE’) markets heavily underperformed other global and emerging markets, and today present a unique investment opportunity due to attractive valuations, ongoing convergence to Western Europe and one of the most powerful short term catalysts being the already announced privatizations. The diverging performance of SEE markets versus other global markets can be partly explained by the higher risk aversion in the aftermath of the financial crisis and structural imbalances in the economies which worsened in the years after 2008. Much has changed over the last few years and economies today are much more robust than they were before the crisis.

The SEE markets, in which KD Funds (known locally as KD Skladi) operates, are classified as frontier markets and as such can be inefficient. Informational asymmetry, dissimilar local legislation and regulation, different languages and customs, and inefficient corporate governance are some of the issues investors are likely to face in these markets. In order to invest in this region successfully, one has to have a deep understanding and expertise of the specific local market dynamics. Throughout its 20 years of investment track record and experience in the region, KD Funds gathered a unique combination of experience, knowledge, network and local presence in the SEE region which have enabled us not only to overcome these challenges but to turn them into our advantage. We firmly believe that local presence is essential due to the diversity of regional markets. Our local investment professionals speak the local languages and have an extensive information network which is imperative when dealing with the information asymmetry in these, more or less, relationship-based markets.