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Lost for words… the fund bosses who put YOUR cash in Russia: Some hold far bigger stakes than many investors may think, says JEFF PRESTRIDGE
Jeff Prestridge has been trying to quiz fund managers whose investors are heavily exposed to Russia – or whose investors may not realise how much they are – he relates his often frustrating experience.
Stock market crises often highlight the investment industry’s worst traits. Happy to market itself when things are going well, the fund management community clams up when events turn against it.
Rather than send out reassuring messages to investors – from whom they have made handsome profits over the years – they become tongue tied. Most disappear into their Mayfair offices and wait for the tide to turn. Cowardly.
It happened in the stock market crash of 1987 – and it occurred again after the bursting of the dotcom bubble in early 2000.
Things weren’t much better in March 2020 when lockdowns ground the world economy to a halt – although some managers were brave enough to talk about the need not to panic (and were subsequently proved right).
This time around, the stock market carnage is more contained, although there are some who believe global equities are heading for a car crash.
A result of roaring inflation, stalling economies and the elephant in the room – global conflict. Friday’s sharp market correction suggests they may well be right.
The real meltdown has been in Russia where share trading has been halted. Of course, Russia isn’t a market most investors would intentionally invest in.
Although there are numerous Russian funds run by established investment managers – the likes of JPMorgan, Pictet and Liontrust – there are investors who won’t realise they hold funds with significant exposure to Russian oil companies, mining businesses and banks.
As the box above demonstrates, some of these funds have emerging market labels with portfolios very much built on the BRIC principle – key stakes in the markets of Brazil, Russia, India and China.
Although China is the dominant force in most emerging market portfolios, some funds have double-digit or near double-digit exposure to Russia. While some have reduced exposure or shorted the Russian market (bet on it falling), the shortterm performance numbers do not make for pleasant reading.
Then there are the funds with an Eastern European investment slant. Some have more than 60 per cent of their portfolios in Russian stocks. The performance numbers here are dreadful. Losses over three months, a year and five years. And I’m not sure things are going to get better quickly.
For the past 11 days, as the Russsian tanks rolled into Europe, I’ve been asking investment companies with funds invested in Russian stocks how they intend to safeguard investors’ assets.
Some have been helpful, others have pulled up the drawbridge.
Currency crash: The rouble has collapsed but so too hs the share price of heavily Russia-exposed firms
For example, Liontrust runs a Russian fund. The latest factsheet confirms assets of £182million invested across 26 companies.
Eleven days ago, I asked what it was doing to ensure investors’ holdings were protected. ‘When do you need a comment by?’ came back the response. ‘PM tomorrow,’ I replied. Silence followed – the lion failed to roar. Five days ago, I received a statement saying the fund had been suspended. It was as if our communications had not happened. The fund’s value is now below £17million.
At least other fund managers told me straight. ‘JPMorgan Asset Management declines to comment,’ was the response when I enquired about fund JPMorgan Russian Securities. On Friday, its shares continued their downward track with two directors quitting the trust’s board.
Investment management companies will survive whatever markets throw at them in the coming weeks. They’re lucrative businesses to be in. But they need to show they care and have a heart.
That means doing their utmost to protect investors’ money. It also means communicating and where possible reassuring investors. Surely, it’s not too much to ask?