Is the £11bn of UK savers’cash in Russia safe?

With political tensions high, and the threat of business sanctions...

YOU need a strong stomach to invest in Russia at the best of times. Reports of widespread corruption and statemeddling in companies mean it can be a rollercoaster ride.

But the risk to British savers has heightened amid claims it had a hand in the poisoning of former spy Sergei Skripal and his daughter in Salisbury. It may mean that you want to move your money out of Russia altogether – if not as a protest, but just as a pragmatic move to protect it.

The threat of economic sanctions from the West has provoked promises of a strong reaction from Russia. The US has already slapped economic sanctions on Russia and, if other countries follow with punitive responses, it would be damaging to its economy and currency, experts say.

While nobody can predict how President Vladimir Putin will react, fears are growing that it will have a negative impact on British investors with money in Russia.

But you may not even realise you have cash invested there.

British savers have more than £11.2bn tied up in Russia firms spread out over more than 320 investment funds, according to data firm FE Trustnet. And some popular UK funds have big stakes in the country.

The £ 1bn Schroder Emerging Europe fund, for example, invests more than half of its cash in Russia, according to FE Trustnet, Blackrock’s £919m Emerging Europe fund invests nearly £490m, while £279m of the £8bn Vanguard Emerging Markets fund is invested there.

James Sullivan, manager of Coram Global Balanced fund, says: ‘The Russian stock market is quite cheap, and the reason it is cheap is because you have the threat of economic uncertainty and confiscation of assets. And what we have seen over the past few days shows exactly why it is so cheap.

‘If this issue with the UK escalates and we enter into Cold War 2, then there is a risk that the Russian government may start confiscating assets, which nobody wants. And any economic sanctions imposed on Russia would have a negative impact on the rouble, which would be a big blow for British investors.’

Over the past year, the Moscow Exchange has performed relatively well, rising 6.2pc. In the past five years it has risen 112pc. But experts believe there could be an exodus among foreign investors if tensions increase further.

Laith Khalaf, senior analyst at broker Hargreaves Lansdown, says that despite recent tensions, ‘it’s unlikely we will see a global wave of withdrawals from the Russian equity market, unless international leaders start to impose measures which damage Russia economically’.

The way most savers get exposure to the Russian economy is through a fund that invests globally or in emerging markets, but many may be invested there without knowing.

Funds will typically show you the ten countries in which they invest the most, but few provide information about the rest, so it could include Russia.

For example, the £1.5bn Invesco Perpetual Global Equity fund invests 0.95pc, or £14.6m, of its cash in Russia, according to FE Trustnet. But because its stake is so small, it doesn’t appear in its list of top ten countries. On top of that, none of the fund’s top ten stock picks are Russian either.

Another example is the £2bn Newton Global Dynamic Bond fund: it invests £21.1m in Russia, according to FE Trustnet.

If you feel strongly against investing in Russia and want to be sure that you are not, contact your fund manager. But while there are clear concerns, experts say you shouldn’t make any rash moves.

David Janes, manager of Miton Cautious Multi Asset fund, says: ‘I am sure we will attempt to make things difficult for Russia.

‘And while aggressive sanctions will be bad for the Russian economy, I do not think we will go overboard. Because if we do, then Russia will just turn around and tell us it will turn off the gas taps, so we won’t let it go that far.’