Liontrust Russia Fund

Q3 2020 review

The Liontrust Russia Fund returned 0.9% for the quarter, ahead of the MSCI Russia 10-40 Index return of -4.8%*.

In line with the correction seen in global equities, the recovery of the Russian market lost steam in mid-August, reversing gains for the quarter, with the MSCI Russia 10-40 Index ending down 4.8%. A modest gain in local equities was more than offset by the ruble depreciating by 8.3% against the USD, and just over 12% against GBP. Despite the weaker ruble and a fairly stable oil price at just over $40/bbl, a key area of weakness was in the energy sector after the Finance Ministry proposed revising the tax benefits for oil companies. This is part of a wider plan to finance the extraordinary spending during the coronavirus crisis and clearly marks a return to fiscal orthodoxy after increased spending this year. This is despite the very low levels of government debt to GDP, at just 13%, and the $175bn held in the National Wealth Fund, 11% of GDP. At just 2-5% of companies’ EBITDA, the higher tax burden is very manageable, but the reduced visibility over taxes in the sector warrants a higher risk premium and does more damage to valuations than the reduction in earnings.

Rosstat revised up their estimate for 2Q20 GDP from -8.5% to -8.0% and full year estimates have recovered modestly to -4%. After declining steadily from May to August, September saw Covid cases rising again and reaching new highs in October as people returned to the cities and schools reopened. We don’t expect to see a return of nationwide lockdowns and any damage to the economy from the second wave is likely to be significantly less than in the second quarter.

Key positive contributors to performance were our holdings in the technology sector, including Yandex, and EPAM, as well as our underweight position in the energy sector. Yandex was added to the MSCI Russia Index in August and is expected to be added at the next quarterly review in November.

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







*Source: FE Analytics as at 30.09.20.


**Source: FE Analytics as at 30.09.20


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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.


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Wednesday, October 21, 2020, 8:59 AM