Product review: Neptune Russia Special Situations fund

Exposure to small and mid-cap companies in Russia is one of four new fund strategies from Neptune.

Available since late December 2012, the Russia Special Situations fund sees William Rice, previously an investment analyst and assistant manager of Neptune’s Russia & Greater Russia vehicle, take the reins as fund manager.

While the Russia & Greater Russia fund focuses on large-caps, the newly launched special situations strategy invests in smaller and mid-cap businesses on the Russian market. The aim is to deliver growth in excess of the MSCI Russia 10-40 index, which limits its largest stock to 10 per cent of the market cap.

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MSCI 10-40 indices are derived from MSCI standard small-cap equity indices and limit the combined weights of all stocks that comprise more than 5 per cent of the normal index to 40 per cent.

Neptune said the fund was ‘soft launched’ to enable them to build a track record and, as such, is currently only available directly from them, rather than via platforms.

MM View:

Investment in Russia has garnered plenty of interest in recent years.

Known for its natural resources, such as oil and steel, strong emerging technology sectors and a growing middle class, bullish investors have ignored political instability for potential premium returns.

In spite of this, Neptune’s £369m Russia and Greater Russia fund has been volatile and is down 14.5 per cent in the past five years.

Moreover, the nation’s GDP growth figures are currently forecast to be 3.6 per cent in 2013, which in spite of being similar to a rate of 3.5 per cent in 2012, is a decline from growth of 4.3 per cent seen in 2011.

The World Bank attributes this to drought conditions affecting agriculture, rising inflation and weak global sentiment.

Investing in emerging market small and mid-caps is not for the faint hearted and only bullish investors should consider such a venture.