Equity risk

With regard to equity risk that results from equity investments, a distinction can be made between:

  • Exit risk, the risk that FMO's equity stake cannot be sold for a reasonable price and in a sufficiently liquid market.
  • Equity risk, the risk that the fair value of an equity investment decreases.

FMO has a long-term view on its equity portfolio, usually selling its equity stake after several years. Equity investments are assessed by the Investment Committee in terms of specific obligor as well as country risk. The investment review committee assesses the valuation of the majority of equity investments semi-annually. The performance of the equity investments in the portfolio is periodically analyzed during the fair value process. Based on this performance and the market circumstances, exits are pursued in close cooperation with our co-investing partners. The total outstanding equity portfolio at December 31, 2011, amounted to €753,366 (2010: €637,802). The total outstanding investment in investment funds equals €592,433 (2010: €485,120).

It can be difficult to assess the fair value of the investment when market data is lacking or when the market is illiquid. Under these circumstances, FMO values equity investments at cost minus impairment. In total, €171,513 (2010: €161,365) of the equity portfolio is valued at cost minus impairment, of which the majority is quoted in US dollars: 48% (2010: 53%). The equity portfolio valued at cost minus impairment denominated in other currencies than euros is not revalued for the exchange rate movements. The equity portfolio valued at fair value is revalued for changes in the value of the equity investment and the movements in the exchange rates, which is accounted for in the available for sale (AFS) reserve.

Equity portfolio distributed by region and sector

At December 31, 2011

Financial institutions

Energy

Housing

Agribusiness, food and water

Diverse sectors

Total

Excl. investment funds

Investment funds

Africa

46,862

90,598

22,133

-

-

32,620

192,213

Asia

16,308

112,894

32,767

2

7,569

-

169,540

Europe & Central Asia

5,525

156,268

175

-

-

3,012

164,980

Latin America & the Caribbean

12,837

71,211

6,825

426

14,141

17,905

123,345

Non-region specific

6,703

88,165

8,420

-

-

-

103,288

Total

88,235

519,136

70,320

428

21,710

53,537

753,366

At December 31, 2010

Financial institutions

Energy

Housing

Agribusiness, food and water

Diverse sectors

Total

Excl. investment funds

Investment funds

Africa

39,166

74,477

18,634

-

-

14,023

146,300

Asia

22,332

95,582

18,519

-

5,939

7,381

149,753

Europe & Central Asia

5,525

-131,143

-

-

-

6,747

143,415

Latin America & the Caribbean

17,954

65,469

4,655

176

10,640

20,890

119,784

Non-region specific

6,697

63,547

8,306

-

-

-

78,550

Total

91,674

430,218

50,114

176

16,579

49,041

637,802