Aim: Growth by investing in equity and equity related securities of companies based in or trading in Russia
Minimum investment: Lump sum $5,000
Investment split: 24% materials, 20% telecommunications, 15% gas, 12% financials/property, 12% oil, 6% retailers, 3% utilities, 2% industrials
Place of registration: Luxemburg
Charges: Initial up to 5.54%, annual 1.75%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7024 0460
HSBC Investments’ GIF Russian equity fund is a Sicav aiming for growth by investing in 20-40 Russian stocks. It will invest mainly in blue chips, though up to a third of the portfolio could be invested in mid-cap companies.
Discussing the case for investing in Russia, Hargreaves Lansdown senior analyst Meera Patel finds it compelling. “It is one of the cheapest markets in the world today. Growth is being driven by its exposure to energy but it is no longer just an energy story. Domestic consumption is booming and this is providing further fuel for growth. “
As an asset class, Hargreaves Lansdown is very positive about the prospects for Russia, although Patel notes this fund may not be suitable for all investors. She says it is clearly higher risk and designed for the more experienced investor.
“In either case, a single country emerging market fund should only make up a small proportion of an overall portfolio, say no more than 5 per cent,” says Patel. She adds that as a first port of call, she would choose a broadly diversified global emerging markets fund through which clients could get exposure to Russia.
“This will be a very concentrated portfolio of 20-40 stocks making it both a high conviction portfolio, but equally higher risk in what is already a high risk market,” says Patel.
She notes that HSBC has been involved in managing specialist single country funds for some time, so it seems to have the expertise in this area.
“I like the fact that HSBC is benchmarking this fund to the MSCI Russia 10/40 which is more reflective and a fairer benchmark to use than the RTS Russian Index. In essence, it means that the biggest stock in the index can only have a maximum weighting of 10 per cent and any stocks weighted more than 5 per cent cannot make up more than 40 per cent of the overall index,” she says.
Discussing the potential drawbacks of this fund Patel says: “My main concern with this fund would be liquidity. Up to a third can be invested in mid caps and there could be a risk that liquidity at the smaller end of the market dries up during difficult periods in the market. Investors would need to bear this in mind when investing,” she says. She reiterates her earlier observation that this fund is not for any investor, but for the more experienced one.
“One criticism I would make is that HSBC’s literature talks about its strengths in this region and that the manager has a 10-year track record. It would have been useful to state what the manager’s track record is, as I cannot tell if the manager is any good at managing Russian equities,” she says.
Scanning the market for potential competitors, Patel says: “The main competition is the Neptune Russia and Greater Russia fund. Other than that, investors can get exposure to Russia through emerging markets funds such as the Allianz RCM Bric stars, Jupiter emerging European opportunities and JPM new Europe funds.”
Suitability to market – Good
Investment strategy: Good
Adviser remuneration: Average