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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Driven by resilient banking and refining holdings across Africa and Eastern Europe, while the firm actively contained AI capex factor risk and pared Turkish allocations."
During the third quarter of 2026, broader emerging and frontier market benchmarks delivered muted performance following a strong first half, with MSCI Emerging Markets returning -0.4% and MSCI Frontier Markets falling -0.3%. Against this backdrop, the East Capital Global Frontier Markets strategy outperformed significantly, generating a net return of +3.9% net of fees. East Capital maintained a defensive stance regarding factor risks after having substantially de-risked and taken profits on its AI capital expenditure exposure in the second quarter, effectively insulating portfolios from the severe July retail leverage unwind that triggered steep drawdowns across Asian semiconductor names. The investment team's macroeconomic outlook centers on digesting the rapid rise in US 10-year Treasury yields to near two-decade highs, driven by stubborn oil prices, tight Federal Reserve policy, and US fiscal expansion. Despite this global valuation headwind, emerging markets demonstrated resilience supported by robust corporate earnings growth revisions—surging from an expected 20% to 74% year-over-year—and tightening sovereign yield spreads. Macro themes emphasize regional divergence, structural financial deepening in underbanked frontier economies, and energy security priorities across Eastern Europe. Portfolio activity was characterized by selective capital redeployment away from volatile segments. The team liquidated and reduced Turkish equity exposures amid local fund liquidations and restrictive monetary policy, while rotating capital into high-margin regional refiners such as Motor Oil Hellas, Tüpraş, MOL, and Orlen. Concurrently, the manager increased Greek equity weightings ahead of an anticipated May 2027 MSCI Developed Market status upgrade and initiated a position in Czech defense specialist CSG.
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