Barings Emerging Europe trust bounces back from Russia woes

Poland flag over Warsaw - a bright spot for Barings Emerging Europe trust — (Image credit: Getty Images)

Barings Emerging Europe trust was dealt a hammer blow by Russia’s invasion of Ukraine. Around 28% of its assets were invested in Russia and instantly became worthless. The share price slumped to barely half its early 2022 peak by late 2023.

Yet Barings and the board decided to soldier on. They widened the investment remit to include the Middle East and Africa as well as Eastern Europe and Central Asia, and renamed the trust Barings Emerging EMEA Opportunities (LSE: BEMO). The share price has since climbed back almost to its high of four years ago, although it still trades at a 17% discount to net asset value (NAV). The board has persistently bought back shares, leaving a trust with net assets of £110million.

How Barings Emerging Europe trust diversified its portfolio

BEMO’s catchment area is a curious collection of markets. Asia accounts for over 80% of the MSCI Emerging Markets index and Latin America is 8%, leaving around 11% to Emerging Europe, Middle East and Africa. Many of these – the Gulf states and the northern half of Eastern Europe – can hardly be called emerging any longer. There is no geographic, political, economic or social homogeneity across the disparate region at all. However, that makes it very well diversified across sectors, companies and opportunities.

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South Africa was a key driver of last year’s 26% investment return, making up 31% of the portfolio at year-end. This included over 5% in each of two gold miners – AngloGold Ashanti and Gold Fields – and over 6% in Naspers, an internet, technology and multimedia investor that indirectly owns 31% of Chinese tech giant Tencent. South African banks have also been good performers, thanks to an improving political and economic backdrop.

Eastern Europe, especially Poland (13% of the portfolio) has been another bright spot, helped by rapid growth that leaves it on a path to overtake much of Western Europe in prosperity. Investments in Hungary and the Czech Republic have also performed well, while Greek banks have benefited from the country’s recovery. With oil prices depressed, relative performance has been helped by avoiding Saudi Aramco. The 22% allocation to Saudi Arabia more broadly held performance back, but not the 10% exposure to the United Arab Emirates.

Turkey, accounting for just 5% of the portfolio, would be an area of opportunity if its government’s economic mismanagement were to improve. The fund is not currently invested in Central Asia, or in Africa other than South Africa. An end to the Ukraine war could be a potential future bonus. While BEMO’s investments in Russia are valued at zero, they could at some point be valuable. The managers have been able to sell a few of them in recent years.

Deserving to survive

Last year’s performance built on a good recovery in 2024. The discount has scope to fall further, which would enhance performance. The shares yield a reasonable 2.5%, with dividends having been raised 5% in 2025. The trust has no borrowings at present, but does not rule out gearing to enhance performance.

BEMO is of a similar size to BlackRock Latin America (LSE: BRLA), which returned 44% in 2025 after five miserable years. It is unfortunate that both trusts are in danger of disappearing as a result of being regarded as “sub-scale” by the big wealth managers. While BEMO passed a continuation vote in October, 33% of votes cast were against the resolution.

A wind-up of either trust would leave their region unrepresented except as an after-thought by the emerging markets generalists that are heavily focused on Asia. The last year has shown that this would be a terrible mistake; there is every chance that these two neglected regions will outperform Asia over the next few years. Both trusts deserve to be at least twice their current size.

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Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.