"We have to move further east in order to keep our returns," Thomas Farthofer, who manages his $200 million fund at Bank Fuer Arbeit und Wirtschaft AG in Vienna, told the agency.
Investors such as Farthofer believe that economic growth in Romania, Bulgaria and Croatia will outpace former investment stars such as Hungary and Poland, which joined the EU in May 2004.
"The EU, the world's largest trading bloc, is targeting membership for Romania and Bulgaria by 2007 and Croatia by 2009. Joining the EU would boost local economies and stock markets as trade barriers fall and travel restrictions are easied," Bloomberg said.
The agency noted that Croatia's Crobex index had advanced 30 per cent in 2005, heading for its seventh straight year of gains.
Citing a report by Vilim Klement, an analyst at Erste Bank AG in Vienna, Bloomberg says that shares in the region remain cheap, and that the 20 largest stocks in Croatia trade at an average 12.6 times estimated 2005 profit.
"History repeats itself," Tim Drinkall, who manages the equivalent of $105 million in Stockholm-based Gustavus Capital AB's Gustavia Balkans fund, told Bloomberg. "Economic growth in the Balkan states will outperform Central European countries, helped by EU enlargement," he said.