Liontrust Russia Fund

H1 2020 review

The Liontrust Russia Fund returned -6.9% in the first half of the year, compared to -10.4% from the MSCI Russia 10-40 Index*.

The first six months of 2020 was a real tale of two halves with the collapse in equity markets in the first quarter followed by a sharp recovery in the second. The acute stage of the coronavirus panic and market selloff began on February 23rd, when Italy reported an outbreak in its northern regions. At this point it became clear that the virus was not a regional concern but a global pandemic. The ensuing collapse of the OPEC+ talks sent Brent crude prices down to $30/bbl which put further pressure on the Russian market. Fuelled in no small part by large-scale fiscal and monetary stimulus, markets have recovered much of the decline suffered as the pandemic swept across the globe. The divergence between developed and emerging market returns can be at least partially attributed to the major developed economies putting together notably larger stimulus packages compared with the major emerging markets.

Over the last few years, Russia’s macro indicators and market performance have largely decoupled from the oil price. The fiscal rule has been the cornerstone of macro stability, but below $40/bbl, Russia becomes more dependent on oil price moves. With oil prices now back to the level set in the budget at the beginning of the year there should be limited pressure beyond the extraordinary measures implemented to help support the economy through the Covid crisis. Russia’s current account is expected to remain in surplus reflecting both its ability to endure lower oil prices and its resilience to external shocks.

Russia’s own stimulus package has been relatively small, with policy measures largely geared toward attenuating the negative effects of the economic decline on the most vulnerable segments of the population and corporate sector. This relative caution is a result of the prevalence of external drivers in Russia’s growth dynamics, and also the scale of uncertainty, including a possible second wave of the pandemic. Excessive use of reserves early on could be viewed as undermining the resilience of the economy in later periods. This aligns with the preference in the pre-pandemic period for macroeconomic stability over growth following the recession in 2014-15. The stability and resilience that has been put in place in recent years, together with low levels of debt and sizeable reserves, stands in contrast to the increased debt levels observed across EM and DM.

Key contributors to the Fund’s relative outperformance were our holdings in the technology sector, including Yandex, and EPAM. Yandex made steps to simplify its structure by buying out Sberbank’s 45% stake in and selling their 25% stake in to Sberbank. Mail continued to make excellent progress in its own JV with Sberbank, Citymobil, and is on track to become the second largest taxi player behind Yandex. There was also a small benefit from our underweight position in the energy sector. The private sector companies that we do own (such as Novatek, Lukoil) outperformed the large state-owned companies (Gazprom, Rosneft).

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 aren’t present in the benchmark, such as the IT and industrials sectors, focusing on Russian corporates who are able to generate value for shareholders and offer attractive returns.

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








Liontrust Russia C Acc GBP






MSCI Russia 10/40 (NR)







*Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested), primary class.


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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.


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.

Thursday, July 16, 2020, 3:28 PM