Geno Tonev: We Pursue Aggressive Strategy

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Geno Tonev: We Pursue Aggressive Strategy

We talked to Geno Tonev* about Ug Market Maximum mutual fund and the Bulgarian Stock Exchange

What is the value of the net assets of Ug Market Maximum currently? How much have they grown since the beginning of the year?

As of 7 May 2007 the net value of the fund’s assets is 1,611,179.59 leva up 60% from the beginning of the year. This growth exceeded our expectations and we hope we will be able to keep up the good rate in the coming months. The net value of the assets of each of the more than 1.07 mln issued shares amounts to 1.5053 leva.

What is the yield you have achieved in the fund’s assets management since the start of the IPO?

We have achieved a yield of over 50% since the beginning of the IPO (18 September 2006). For the past 6 months the yield has reached 38.62% and since the beginning of the year – 14.17%.

What makes Ug Market Maximum different from the rest of the mutual funds in Bulgaria?

Generally speaking each collective investment scheme, depending on its risk profile, sticks to certain conditional behaviour frameworks. Ug Market Maximum is a mutual fund, investing mainly in stock (up to 80% of the assets), traded on the Bulgarian stock market. In terms of this indicator we belong to the group of aggressive or high-risk collective investment schemes. We are not the only ones in Bulgaria but what makes each fund or investment company different from the rest is the strategy of its managers. Our strategy is clearly defined – to invest in sectors of the economy which we deem perspective, more specifically in their highest quality representatives on the market.

What is the distribution of your investments in shares, bonds and government securities?

Ug Market Maximum’s assets are distributed roughly as follows: about 73% of the assets are invested in stock and rights of Bulgarian public companies. The share of bonds (mostly corporate) is about 11%, and the free cash and cash equivalent account for about 14% of our assets.

As you can see we pursue a relatively aggressive strategy, keeping a relatively high share of investments in stock and rights, but at the same time we don’t underestimate market risks. That’s why we always have enough liquid funds – no less than 10% of our assets.

The average yield to the debt securities at the moment of their acquisition is 7.10%. The bonds are corporate, issued by stable Bulgarian companies. Part of them is denominated in leva, and another part is in euro. Some of them bring fixed six-month coupon, and others – floating, bound to the interest rates in Europe.

What are the main sectors Ug Market Maximum stakes on to achieve higher yield?

Following our management strategy, the fund invests mainly in the financial sector, construction, trade, machine industry. If I have to give you some brief outline of the distribution of our assets, it would roughly look like this:

Companies operating in the construction and financial sector account for the biggest share of our portfolio – respectively 12.86% and 10.75% of total assets. They are followed by holding companies with diversified portfolio of subsidiaries – 9.45%. Next we have companies from the machine building sector, trade, metallurgy and metal processing.

It looks like 2007 will be the year of IPOs and secondary public offerings. How do you think this fact may impact Ug Market Maximum?

I hope favourably, because we intend to take part in some of them. Even if we don’t, however, the very fact that big IPOs are successfully being organized in Bulgaria will attract capitals to the market, which is good for all investors no matter if they have taken part in a given IPO or not.

Do you notice any increased interest by foreign investors in BSE in recent years? What do you think is the reason for it?

With the development of our market, with the appearance of new and higher quality companies on BSE, foreign investors’ interest is naturally growing. The success of the latest major IPO proved the existence of big interest in the Bulgarian capital market. Bulgaria’s EU accession also greatly impacted the structure of market participants and I think that this process will significantly accelerate this year and next year. Concerning the market, I think that the best is yet to come.

*Geno Tonev has been in the “branch” for more than seven years. He has been involved in almost all activities of IB Ug Market AD. He was a securities broker from the spring of 2003 until the fall of 2006, when he became a portfolio manager of Ug Market Fund Management mutual fund. He holds a master’s degree in Finance from the Economy Academy in Svishtov. He is also a licensed broker and investment consultant

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