28 June – Why now’s the time to take a passive approach to Russia
Elio Manca, Managing Director of ITI Funds, was recently interviewed by Citywire Selector, the website on fund manager ratings and investment analysis for professional investors. The discussion was on Russia focused ETF products:
‘Essentially in emerging markets like Russia you are getting a bigger risk on liquidity in the small-cap market when you’re invested in an active fund. These less liquid names definitely provide value to investors, but you are taking a bigger risk.
‘Fund selectors should be asking active managers if they have a team with a good knowledge of Russia and they need to think about the sort of fees they want to pay. Active managers can outperform as well as underperform, but that’s the risk investors are taking.’
‘Our initial pocket of investors are Russian, they have a lot of interest in our fixed income products and that is where we expect to see the most inflows. From international investors, we are seeing interest in both the fixed income and equity products.
‘At the end of the day, with the equity products you are buying local shares and the index is denominated in dollars. You have exposure to the currency which is very interesting especially when you look at things like sanctions. The local market has continued to perform very well.’
‘I disagree that it’s brave but would say it’s a good entry point at the moment. Russia is above all else a commodity play. But it’s not just oil, you also have a lot of material companies based there from which others are sourcing parts for electric vehicles and the consumer sector there is also growing.
‘Countries like Canada, Russia, and Australia are commodity plays and you buy those because you want to buy into that story. But in Russia it’s not just commodities, the consumer is also coming up and I think the impact of the World Cup will be very relevant in consumer-facing businesses,’