‘It could be party time for Russia’
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.
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