The crisis in Ukraine has little effect on asset owners invested in emerging markets fixed income although a further escalation in the crisis might heighten the risk of their investments, according to data from eVestment.
The database and analytics company tracked 111 products with exposure to Ukrainian markets as of Dec. 31, mostly in hard currency debt.
The exposure to Ukraine totaled $5.3 billion, only 1.27% of the $418.3 billion total emerging markets fixed-income assets tracked by eVestment.
The minimal amount of exposure is attributed to significant outflows from Ukraine throughout 2013, particularly in the second half of the year. Fifty-seven percent of the 111 tracked strategies reported reductions in their exposure to Ukrainian debt in the second half of the year.
Most of this reduction occurred in the third quarter, according to the eVestment data.
“Ukraine is a relatively small portion,” said Peter Laurelli, vice president, head of research at eVestment, in a telephone interview. “Its presence in emerging markets on a GDP basis relative to the larger emerging markets is small, so the exposure might be representative of that. Ukraine is just one portion. When you look at exposure to Russia, that's something totally different.”
Looking forward, there is a possibility of an impact on trade or from sanctions in Russia, Mr. Laurelli said.
Exposure to Russia is “about $72.6 billion,” Mr. Laurelli said, “and so you know the numbers start to add up. If you look across all of Eastern Europe, then the exposure gets up to about $155.3 billion. Just as much as these countries have economic ties, the situation there is impacting the perceived relationships across those. That will trickle down to how investors feel about what that risk is worth.”
