The Expat family of exchange traded funds covering the CEE equity markets grows up to 11 funds

05.01.2018

On 4 Jan 2018, the Bulgarian Financial Supervision Commission gave Expat Asset Management permission to organize and manage 6 new passive index exchange-traded funds. Each ETF will track the performance of the major local equity index in 6 CEE countries – Slovakia, Hungary, Slovenia, Croatia, Serbia and Macedonia. The funds will be listed on the Bulgarian Stock Exchange – Sofia and later cross-listed on the Frankfurt Stock Exchange (XETRA).

Another 4 ETFs covering the local equity indices of Greece, Romania, the Czech Republic and Poland were approved at the beginning of December 2017, in addition to the already operational ETF covering the major local equity index in Bulgaria. Thus, the family of exchange traded funds managed by Expat Asset Management grew up to 11 funds covering the equity markets in most CEE countries:

List of All ETFs Managed by Expat Asset Management

Expat’s ETF products are unique market propositions providing country-specific exposure in the CEE region to international investors. They are designed to be major highways for capital flows to and from the equity markets of the CEE countries. They will link the stock exchanges of those countries with the financial centres of London and Frankfurt, making it easy and cost-effective for international investors to take and liquidate an exposure to the specific countries in the region. They overcome deficiencies such as lack of liquidity, lack of access, cross-border settlement issues, high execution costs, large spreads, and other technical factors typical for many of these markets.

Expat’s ETFs have the following characteristics:

• UCITS-compliant
• passive equity index trackers
• open-ended, providing daily liquidity
• using direct replication
• reinvesting dividends; not distributing any dividends

Advantages of the Expat’s ETFs:

• An easy and transparent way of investing in a specific country from the CEE region.
• Diversification. Investors gain exposure to the largest and most liquid stocks on the relevant stock exchange.
• Superior liquidity. The market makers of the fund maintain buy and sell quotes and ensure that the shares can be traded at any time. The primary market for purchase and redemption of shares is also open every day to larger qualified investors.
• Easy to follow. There is no need to devote time and resources to analyze, pick and follow individual stocks. Index investing is a convenient and efficient macro play.
• Low transaction fees. It is cheaper to invest in one instrument rather than in shares of multiple companies.
• European regulation. The ETFs are fully compliant with the UCITS directive of the European Union.

Primary and secondary market

The number of shares of each of Expat’s ETFs can grow and shrink on a daily basis as a result of capital inflows (subscriptions of new shares) and outflows (redemptions of old shares) on the primary market. Only institutional investors and other qualified investors have access to the primary market. All investors, including retail, can trade the shares of all ETFs on secondary markets (stock exchanges). The existence of both primary and secondary markets ensures superior liquidity. Any amount can be invested or divested on any given day.

Currency exposure

All of Expat’s ETFs are quoted in EUR (only the Bulgarian ETF is traded in both EUR and BGN). Three of the countries (Slovakia, Slovenia, Greece) are members of the Eurozone, hence there is no FX risk against the EUR for these three funds. Another country, Bulgaria, has a currency board system with a fixed BGN/EUR exchange rate. The remaining seven countries (Poland, the Czech Republic, Hungary, Croatia, Serbia, Macedonia, and Romania) have their own currencies which fluctuate against the EUR. Expat’s ETFs do not hedge their exposure to the local currencies against the EUR. The funds are quoted and traded in EUR, but investors bear the underlying exchange rate risk in seven of the 11 countries.

About Expat

Expat Asset Management is the largest wealth management company in Bulgaria. The company manages hundreds of individual investment portfolios, 3 mutual funds with global focus, and a family of ETFs tracking the performance of stock indices from the CEE region.