Liontrust Russia Fund

Q3 2019 review

The Liontrust Russia Fund returned -0.3% in the third quarter of the year, behind of the MSCI Russia 10-40 Index’s 2.1% gain.

Market overview

The primary driver of global markets during the third quarter was the renewed escalation of the US–China trade war with further tariffs being applied by both sides in August, although September saw some improvement in risk appetite as both sides agreed to face-to-face talks in October and some tariffs were delayed. The Fed cut rates by 50 basis points during the quarter and more cuts are expected before year-end. The ECB cut its deposit rate by a further 10bps to -50bps and restarted its QE programme on an open-ended basis, while introducing tiering to its TLTRO programme to provide a little breathing space for the banking sector. In addition to this, crude oil had a volatile quarter, spiking to $70 following the attacks in Saudi Arabia before falling back to end the quarter at $61, down 8.7% from the end of June.

Inflation continued to decline reaching 4% in September, in line with the Central Bank’s target. Receding inflationary pressures allowed the Central Bank to cuts rates by 50bps during the quarter to 7%. The Liontrust Russia Fund returned -0.3% for the quarter, with strong gains in Norilsk Nickel and Surgutneftegas offset by weakness in Evraz and Mail.ru.

Outlook

The Russian benchmarks continue to be heavily weighted in the energy sector, with many sectors of the Russian economy underrepresented or not represented at all. The Liontrust Russia Fund continues to offer diversified exposure in sectors that are not present in the benchmark, such as the IT and industrials sectors.

Despite the recent outperformance of the Russian market against broader emerging markets, Russia is still trading at a more than 50% discount to emerging markets, near the lowest levels seen in the past ten years and only marginally higher than at the peak of the crisis in late 2014. 

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

 

 

Sep-19

Sep-18

Sep-17

Sep-16

Sep-15

Liontrust Russia C Acc

20.2

9.6

28.0

49.2

-24.1

MSCI Russia 10-40 Index

23.0

12.3

15.9

47.6

-16.3

 

*Source: Morningstar as at 30.09.2019, on 17.10.2019.

 

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 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.

Disclaimer

The information and opinions provided 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. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, October 23, 2019, 9:50 AM