Investing in Russia: what the experts think
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Stick or twist?
The country’s “increasingly tense stand-off” with the UK is posing “a real dilemma” for investors in Russian funds, said Mark Atherton in The Times. Should they stick with their investments through times that are likely turbulent, or “cash in their chips on the basis that things can only get worse”? It’s a tricky call. The problem for those concerned about having money in Russia is that it has been “a very good place to invest in recent years” – despite sanctions. Neptune’s Russia and Greater Russia fund has returned 98.8% over three years; the Jpmorgan Russian Investment Trust has returned 115.2% over the same period.
Sanctions, what sanctions?
Oleg Biryulyov, who runs the Jpmorgan trust, says he expects Russian stocks to benefit from a stronger oil price, falling inflation and local cuts in interest rates in 2018. But, actually, business is already going great guns, said Henry Foy in the FT. Oil and gas production is growing, and the economy is stable. Indeed, the country’s most important industries are largely “unscathed” by Western sanctions imposed following the 2014 annexation of Crimea. “Russia has found new ways, and new friends, to help it work around the sanctions regime”: cash from China has offset the withdrawal of European and US banks; a “deepening relationship” with Saudi Arabia has helped too.
Cheap and uncheerful
“Russian equities are cheap, but for a reason,” Juliet Schooling Latter of Chelsea Financial Services told The Times. “The market is full of low-quality companies and it is difficult to do business there for fear of state ‘involvement’. A pure Russian fund is suitable only for the very highestrisk investor.” If you want exposure, go for a generalist emerging markets fund, “which will vary the allocation according to circumstances”. I’m getting out completely, said Ian Cowie on Citywire. Having more than doubled my money, “I sold all my shares in Blackrock Emerging Europe (BEEP) investment trust because 55% of its assets are allocated to Russia”. BEEP remains “an effective way to gain exposure to economic recovery in an exciting region”. But after events in Salisbury, “ethical issues” have now been added to political risk. That’s rather “too much excitement” for me.