Raiffeisen Capital is expanding the mandate of its fund focused on the biggest emerging markets after Russia’s intervention in Ukraine pared appetite for the nation’s assets.
“The BRIC concept is slowly dying,” Vladimir Vedeneev, head of portfolio management at Raiffeisen Capital in Moscow, which manages about 32 billion rubles ($933 million), said in an interview on June 20, referring to the markets of Brazil, Russia, India and China. “People got scared of the general situation in Russia and began to massively inquire about foreign assets.”
Raiffeisen will add global emerging markets to the revamped fund, which is due to be introduced this week with about 180 million rubles in assets under management, Vedeneev said. Russian stocks will receive an allocation of about 30 percent in the fund, which will include Korean and other developing-nation equities, he said. The BRIC fund, which started in 2011, returned 0.8 percent in the past three years and had 132 million rubles in assets as of June 19, according to data compiled by Bloomberg.
Investors fled Russian assets in March after Vladimir Putin’s incursion into Crimea prompted U.S. and European Union sanctions that drove the benchmark Micex Index into a bear market. The ruble is down 4.1 percent this year, the third-worst performing emerging-market currency, according to data compiled by Bloomberg. The MSCI BRIC Index has climbed 2.6 percent this year, compared with a 4.2 percent advance for MSCI Inc.’s emerging-market gauge.
Clients “refused to consider assets in rubles,” Vedeneev said. The trend started last year and peaked in April as the Russian currency tumbled amid the Ukraine crisis, he said. This year, Raiffeisen mainly saw inflows into its Raiffeisen-USA fund, which invests in U.S. stocks, and its Raiffeisen-Active Management Fund, which has about two thirds of its assets invested in foreign equities, Vedeneev said.