‘It could be party time for Rus­sia’

The Daily Telegraph - Your Money - - INVESTING FUND OF THE WEEK -

Colin Croft of the Jupiter Emerg­ing Euro­pean Op­por­tu­ni­ties fund tells Laura Suter why it could boom

Rus­sian stock mar­kets gained around 90pc last year as the oil price rose and there were signs that the po­lit­i­cal risks threat­en­ing the coun­try could be sub­sid­ing. Don­ald Trump’s in­au­gu­ra­tion as Amer­i­can pres­i­dent has helped to boost the coun­try, with Mr Trump stat­ing many times dur­ing his cam­paign his wish to have closer ties with Rus­sia. This has led to spec­u­la­tion that the sanc­tions im­posed on Rus­sia af­ter the Ukraine cri­sis could be re­laxed.

Colin Croft, man­ager of the Jupiter Emerg­ing Euro­pean Op­por­tu­ni­ties fund, has around 60pc of the port­fo­lio in Rus­sian com­pa­nies. He in­vests across Euro­pean emerg­ing mar­kets, mainly in cen­tral and eastern Europe.

He talks to Tele­graph Money about why the “Trump bump” for Rus­sia could con­tinue, the wage gap that is con­tin­u­ing to boost eastern Europe, and why in­vestors in the fund need to be braced for volatil­ity.

How do you pick stocks?

We have a rea­son­ably con­cen­trated port­fo­lio of about 40 com­pa­nies, and we are look­ing for changes that have not been priced in yet. Even a busi­ness that is not great can make money if it gets bet­ter or you buy it cheaply enough.

You have 60pc of the fund in Rus­sia. What is your out­look for the coun­try?

At the be­gin­ning of last year the mar­ket was re­ally over­sold. Peo­ple were very pes­simistic about the global econ­omy, they were scared of China’s econ­omy fall­ing, and that didn’t hap­pen. Peo­ple do get ex­ces­sively pes­simistic some­times.

This year is go­ing to be much more com­fort­able for the Rus­sian econ­omy. If the oil price stays around $55 a bar­rel, that is well above the num­ber the Rus­sian gov­ern­ment has bud­geted, which is $40.

I think there is some scope for the econ­omy to re­turn to growth. They have man­aged to get in­fla­tion un­der con­trol – it has gone from 17pc to 5pc – and con­sumers will start to see a rise in in­come, which could be good for do­mes­ti­cally fo­cused com­pa­nies.

How it is go­ing to be af­fected by Don­ald Trump’s elec­tion?

Ob­vi­ously it is pretty early to tell, but he did talk in his cam­paign about im­proved re­la­tions with Rus­sia. The im­por­tant thing is that it is not go­ing to get any worse.

We think there is some scope for the Rus­sia sanc­tions to be eased. We have seen al­ready what that might do to Rus­sian mar­kets. There were re­cently some (false) ru­mours that the US was eas­ing ex­ist­ing sanc­tions, and in a cou­ple of min­utes the Rus­sian rou­ble strength­ened by 2pc.

If that does hap­pen, it will be party time for the Rus­sian mar­ket. For me it will be the ic­ing on the cake.

You can in­vest across cen­tral and eastern Europe. Which coun­tries are you choos­ing?

We have been in­creas­ing our al­lo­ca­tion to Poland, as a lot of neg­a­tiv­ity is priced in but the econ­omy is not do­ing too badly. Poland is still ben­e­fit­ing from a low cost of labour. That gap in labour costs is not go­ing to be closed for a long time, which is very good for any­one in­vest­ing in the re­gion.

We have been a lit­tle bit cau­tious about Turkey. How­ever, there is a big di­ver­gence be­tween the mar­ket, which is gen­er­ally pes­simistic, and the Turkish com­pa­nies, which say things are not so bad. If things turn out not to be as bad as peo­ple think, it might end up hav­ing a good year.

The fund has had years of large highs and years of low re­turns in per­for­mance. Why?

I think the key is, if you’re go­ing to in­vest you need to stick with it for the longer term. If you bought at the fund’s launch then you have seen re­turns that far ex­ceeded those from Bri­tish prop­erty or shares. You can’t ex­pect to buy low-risk in­vest­ments and get a fan­tas­tic re­turn.

Do you have your own money in­vested in the fund?

I have done in the past, but all my re­sources are tied up in mov­ing house at the mo­ment. If I wasn’t, I would very much like to. In this year’s Isa I hope to get some in­vested.

What would you have done if you hadn’t be­come a fund man­ager?

I think I would have been an en­tre­pre­neur of some kind. I think about go­ing to Ge­or­gia and set­ting up a busi­ness: a ski school or a ho­tel.

How to buy the fund as cheaply as pos­si­ble

The trust has a to­tal cost (the “OCF” or “TER”) of a year. Be sure to buy the right “share class”, which is “I”. The in­vest­ment shop through which you buy the fund will also levy a charge. Some will charge


a per­cent­age of the amount in­vested, oth­ers will ap­ply a flat an­nual fee. Our colour coded ta­bles at

tele­graph.co.uk/ in­vest­ing

will guide you to the cheap­est fund shop for your cir­cum­stances.


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