Investing in Russia: risky but rewarding?

The only investment trust focusing on the world’s cheapest stockmarket is worth a look, says Max King.

Vladimir Putin
There is no guarantee that an alternative to President Vladimir Putin would be an improvement
(Image credit: © Getty Images)

It is hard to think of a more contrarian investment than Russia. Not only is President Vladimir Putin the bête noir of Western governments, but hydrocarbons account for 40% of the market. As a result, Russia, according to Priyesh Parmar of Numis Securities, “is the cheapest major global equity market, trading on a historic price/earnings ratio of just 9.5 and offering a yield of around 5%”. The only investment trust specialising in Russia, the £300m JPMorgan Russian Securities (LSE: JRS), is on a 12% discount to net asset value (NAV) and yields 4.6%.

Its manager, Oleg Biryulyov, is upbeat. His portfolio has a 72% overlap with the benchmark index and is priced, he says, on 7.9 times forward earnings and a price/book ratio of 1.2. The forward dividend yield is 7.6%, yet annual earnings growth is expected to average over 7% in the next five years. The state’s budget is based on a $40-per-barrel oil price so, with a price above $60, finances are healthy. He does not expect political change nor any shift in the regime of Western sanctions. “The market is [at] its historic high but is still very cheap.”

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.