Tundra Sustainable Frontier Fund loses money on Lankan equities in November

While the Sri Lankan equities are on a bull run buoyed by positive local investor sentiment on policy and political stability and certainty on tax policy, foreign funds, which have invested in Sri Lankan stocks, appear to have failed to make the most of the rally.

The Tundra Sustainable Frontier Fund, which has equity investments in emerging markets such as Sri Lanka, said it lost money in November while the indices at the Colombo Stock Exchange (CSE) added gains. 

“Negative contributions were received from our positions in Egypt and Sri Lanka, as well as lack of exposure in Slovenia and Romania,” the Tundra Sustainable Frontier Fund said in its monthly update for November. The fund invests in markets such as Vietnam, Bangladesh, Sri Lanka, Pakistan, Egypt and Nigeria, as its founders believe in these countries’ strong population growth, rapid urbanisation, investments in infrastructure, growing middle class and stabilising political environments.

The fund has 8 percent exposure to Sri Lankan equities with the highest exposures are in Pakistan, Vietnam and Bangladesh, with allocations of 26 percent, 24 percent and 11 percent, respectively. 

Tundra Fonder, the Swedish asset manger specialised in frontier and emerging markets and the owner of the above fund, in an earlier report said Sri Lanka is in for lower for longer, in terms of interest rates and that had already swayed investors into equities. 

They also predicted that this trend would persist with local investors deciding the market direction albeit foreigners continued to sell. 

“Thus, despite continued sales from foreign investors, local investors are currently deciding direction of the market. We believe this trend will continue as long as bad yields remain at these levels, despite uncertain profit prospects for the current year.” 

The listed entities on the CSE reported their highest earnings quarter in September in two years. 

The fund said that choosing the right company would continue to be a decisive factor for long-term good returns. 

“We have always argued that it is much more important to ensure that you invest in good companies than to ‘jump from turf to turf’ between different markets. Successful stock-picking requires detailed knowledge of the markets in which you invest, which in turn requires limitations.”