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Liontrust Russia Fund

Q4 2021 review

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust Russia Fund returned -5.4% for the quarter, versus the MSCI Russia 10-40 Index return of -8.8%*.

Russian equities had a positive start to the quarter, as the market made a new high for the year in October but faded into yearend as geopolitical tensions resurfaced.

The Russian economy grew by 4.3% yoy in the third quarter of 2021 implying not only that it has now exceeded pre-pandemic levels but has reached the pre-pandemic longer run trend. Inflationary pressures remain with CPI reaching 8.4% in November and December. As a result, the CBR continued to hike interest rates by a further 100bps in December to 8.5%. As inflation eases through 2022, we may be at the end of the hiking cycle and the CBR could have the opportunity to cut rates in order to meet its 1-2% real interest rate target.

We continue to believe that a Russian military campaign to subjugate all or part of Ukraine is unlikely. Putin is likely to remain reactive and a Russian military occupation of the Donbas would only occur in response to the Ukrainian government seeking a military solution. With presidents Putin and Biden talking in December and talks scheduled for January between Russia and the US, NATO and OSCE, there is an opportunity for the misunderstandings on both sides to be cleared up somewhat. It is also an acknowledgement by the US that Russia has legitimate concerns over NATO enlargement. Russia’s aim is to keep the Donbas conflict frozen, and any tensions are designed to remind Washington and Europe of Russia’s red lines. In fact, it is in both Russia and the US’s common interest to keep the conflict frozen as both sides would have too much to lose by escalating the conflict. There is room for some de-escalation as these talks happen, and Putin and Biden may also have an in person meeting this year.

The Liontrust Russia Fund fell by 5.4% in the fourth quarter to finish the year with a +18.9% return. The materials sector was the standout performer supported by the continued strength in the global economy and the weaker ruble. More domestic facing sectors fared much worse with financials and consumer staples down 15% and communication services down 25%. Earnings expectations for the Russian market continue to be revised upwards and are now nearly 65% higher for 2021 and nearly 50% higher for 2022 compared with estimates at the start of 2021. This has resulted in a significant derating of the market with the MSCI Russia 10-40 Index now trading at just 6x forward earnings. There is clearly a significant geopolitical risk premium embedded in valuations. There would no doubt be further downside if the conflict in Ukraine saw material escalation, but as both sides are incentivised to avoid escalation and are now talking more frequently, we see potential for de-escalation in the months ahead.

Discrete years' performance (%)**, to previous quarter-end:







Liontrust Russia C Acc GBP






MSCI Russia 10/40







*Source: FE Analytics as at 31.12.21.


**Source: FE Analytics as at 31.12.21.

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Key Risks 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.  


This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
Global Fundamental

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