FT: Foreign fund managers retreat from Poland

According to the Financial Times, large asset managers are scaling back their exposure to Poland over fears that a political stand-off between the country’s maverick new government and Brussels has undermined the investment case for the EU’s eighth-largest economy. The British newspaper cites research by EPFR, the data provider, which showed investment flows to Polish assets slowed sharply in April, to $34.32 million, down from $149.83m in March. This followed a warning from the European human rights watchdog that the new government was endangering democracy with changes to its constitutional court. The Financial Times also quoted asset managers with significant exposure to Poland. Shahzad Hasan, emerging markets portfolio manager at Allianz Global Investors, which oversees €435 billion of assets, said Poland was previously “the darling of emerging markets.” He has scaled back his exposure to Polish assets since the new government was elected. Maarten-Jan Bakkum, emerging market strategist at NN Investment Partners, the Dutch fund house, told the Financial Times investing in Poland is increasingly risky. NN’s converging Europe equity fund has cut its exposure to Poland from 35 percent in September to 28 percent in February.  “Since [the Law and Justice party] has come to power, we have been gradually reducing our exposure further. We are worried and so we have been selling.” Mr Bakkum added he is now considering adopting an underweight position on the country because “the investment climate [is] being hurt." Fergus Argyle, a UK fund manager at Somerset Capital, which has maintained its 3 per cent exposure to Polish assets, said investor sentiment could deteriorate further if the Law and Justice party breaks the EU budget-deficit target by maintaining pre-election commitments of lowering the retirement age, raising the lowest rate of income tax and cracking down on banks.