Liontrust Russia Fund

Q4 2020 review

The Liontrust Russia Fund returned 6.9% for the quarter, versus the MSCI Russia 10-40 Index return of 11.9%*.

Global markets rallied in the fourth quarter as vaccine announcements led to hopes that mass vaccination will allow for a return to normalcy, despite coronavirus cases rising across the world.


The Russian and global economies have both started recovering long before the end of this pandemic. Although the second wave of the pandemic appeared to be much more severe, in most regions, governments have opted not to reinstate lockdowns and have instead favoured softer measures such as mandatory mask wearing and contact tracing. The global economic recovery should outpace Russia’s, as Russia has experienced a milder recession than most other economies, with the exception of southeast Asia. The key reasons why Russia fared better include low leverage, conservative monetary and fiscal policies before the pandemic, and the limited role of SMEs in the Russian economy.


The US election was also supportive for global markets with Joe Biden winning the presidency. For Russia, we maintain our view that a Biden presidency is positive from a sanctions perspective as implementation will move from the legislative to the executive, with the Democrats no longer needing to use Russia as a weapon against Trump. We don’t expect any new relevant sanctions against listed Russian corporates, with new measures limited to restrictions on individuals. In line with this, EU ambassadors have agreed to create a European Magnitsky list which would place asset freezes and visa bans on individuals and entities deemed to have violated human rights, similar to the US Magnitsky Act. This is further evidence of the shift in sanctions philosophy in both the EU and US away from market-wide sanctions towards harsher and more targeted measures.


The MSCI Russia 10-40 Index rallied 11.9% during the fourth quarter, to end the year down -4.6%, having fallen by as much as 35% in March. This was driven by the more cyclical sectors, with financials, energy and materials leading the way, while utilities, telecommunications and consumer staples lagged. The Liontrust Russia Fund returned 6.9% in the fourth quarter, ending the year with a small positive return of +0.4%. The majority of the underperformance during the quarter came from our underweight in the energy sector, as well as our overweights in gold miners and technology stocks. While the energy sector was a natural beneficiary of the rising oil price and rotation into value seen during the fourth quarter, our concerns over capital allocation remain and we continue to have a preference for private companies Novatek and Lukoil over state owned Gazprom and Rosneft. Clear evidence of an improvement in capital allocation will be required for us to change our views here. Gold miners declined modestly during the quarter as gold consolidated from its August high of over $2000/oz. Prices have recovered through December and we have a constructive outlook for 2021. Material production growth over the medium term should further support earnings.


The expectation is that 2021 will be a year of rapid recovery and that life will have more or less returned to normal by the end of the year. Although the prevailing view is that 2021 will bring us back to normality, some developments seen in 2020 will persist. Distinguishing between cyclical and structural changes is important in understanding the outlook for 2021 and beyond.


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








Liontrust Russia C Acc GBP






MSCI Russia 10/40







*Source: FE Analytics as at 31.12.20.


**Source: FE Analytics as at 31.12.20


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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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Monday, January 25, 2021, 3:54 PM