At a loss for words…the fund bosses who put YOUR money in Russia
At a loss for words… the fund managers who place YOUR money in Russia: rather than sending reassuring messages to investors, they are silent
Bear-faced aggression: Russia’s invasion of Ukraine
Stock market crises often bring to light the worst characteristics of the investment industry. Happy to sell out when things are going well, the fund management community keeps quiet when things turn against them.
Rather than sending reassuring messages to investors – from which they have made handsome profits over the years – they are becoming silent. Most disappear into their offices in Mayfair and wait for the tide to turn. Cowardly.
It happened during the stock market crash of 1987 – and it happened again after the dot.com bubble burst in early 2000. Things weren’t much better in March 2020 when lockdowns crippled the market. global economy – although some managers were brave enough to speak of the need not to panic (and later were right).
This time around, the stock market carnage is more contained, although some believe global equities are headed for a car crash. The result of runaway inflation, stalled economies and the elephant in the room – global conflict. Friday’s sharp market correction suggests they might be right.
The real meltdown occurred in Russia, where stock trading was halted. Of course, Russia is not a market that most investors would intentionally invest in.
While there are plenty of Russian funds run by established investment managers – like JPMorgan, Pictet and Liontrust – some investors won’t realize they’re holding funds with heavy exposure to Russian oil, mining and banking companies.
As shown in the box below, some of these funds have emerging market labels with portfolios very largely built on the BRIC principle – key issues in the markets of Brazil, Russia, India and China.
Although China is the dominant force in most emerging market portfolios, some funds have double-digit or near-double-digit exposure to Russia. While some have reduced their exposure or sold short the Russian market (betting on its fall), the short-term performance numbers are not pleasant to read.
Then there are the funds with an investment orientation in Eastern Europe. Some have more than 60% of their portfolios in Russian stocks. The performance numbers here are abysmal. Losses over three months, one year and five years. And I’m not sure things will improve quickly.
Over the past 11 days, as Russian tanks rolled into Europe, I asked investment firms with funds invested in Russian stocks how they intended to protect investors’ assets.
Some were helpful, others lifted the drawbridge.
For example, Liontrust manages a Russian fund. The latest fact sheet confirms assets of £182m invested in 26 companies. Eleven days ago, I asked what he was doing to ensure that investors’ assets were protected. “When do you need a comment?” came back the response. ‘PM tomorrow,’ I replied. Silence followed – the lion did not roar. Five days ago I received a statement saying that the fund had been suspended. It was as if our communications had not taken place. The value of the fund is now less than £17m.
At least other fund managers have told me directly. “JPMorgan Asset Management declines to comment,” was the response when I asked about the JPMorgan Russian Securities fund. On Friday, its shares continued to fall with two directors leaving the trust’s board.
Asset managers will survive whatever the markets throw at them in the coming weeks. These are lucrative businesses. But they have to show they care and have a heart.
This means doing everything possible to protect investors’ money. It also means communicating and, if possible, reassuring investors. Surely that’s not too much to ask?