Some money managers took Russian risk completely off the table after the Trump administration announced sanctions against a number of Russian oligarchs, companies and government officials. But they acted quickly again when they realized volatility had presented opportunities.
Mirabaud Asset Management's Dan Tubbs, head of global emerging markets equity research and portfolio management, said the firm had Russia as its biggest overweight in its global emerging markets strategy in January, trimming to neutral at the end of February and to an underweight position in March. "We went into this tremendous volatility with underweight Russia, which was fortunate," Mr. Tubbs said.
Following the sanctions announcement, "we tried to be nimble (and) sold our last holding we had in Russia. In our experience it's often better to get out very quickly, see how the dust settles and then reassess the situation."
The team analyzed the impact of the announcements on Russian companies and saw the impact was "not all that material. The following day, unusually for us, we bought the stock back again ... we were quite fortunate to get out quickly and bought back at a good level. Since then we have added other companies, and as of today we are overweight Russia once more."
Exchange-traded funds firm ITI Funds' equity ETF tracks the Russia Trading System index, a capital-weighted index made up of common and preferred equity securities of Russian companies that are traded on the Moscow Exchange. "The RTS index has a 60 basis points exposure to (aluminum company) Rusal, and due to the sanctions we decided straight away to sell the Rusal position," said Elio Manca, managing director responsible for sales and business development in London. Executives ran a "very small tracking vs. the index, to avoid any potential issues for our clients despite the fact that the sanctions are not driven by Europe."
However, executives said financial markets were driven by political news rather than fundamentals. "In our view the economic impact on the real economy is limited, and the drop in prices both on the equity and bond markets represent an interesting entry point," Mr. Manca added.
And Artisan Partners' emerging markets team has been "meaningfully overweight Russia since 2015," although it began reducing exposure early this year in favor of other opportunities, said New York-based analyst Nicolas Rodriguez-Brizuela. "Since then, the recent market sell-off has allowed us to add opportunistically to our current Russia holdings in which we maintain our conviction," he said.
