Fund of the week: ship-shape fund forges ahead
A trainee submarine officer in the early 1990s, some might think Oleg Biryulyov’s decision to turn his back on a solid naval career to take an economics degree at Moscow University was a bold one. As it turned out, the Russian Navy’s loss was a huge gain for investors in the JP Morgan Russian Securities Fund. It’s returned 516% over the past five years, according to the Association of Investment Companies.
Having taken big bets on the energy sector early on in the fund’s life, Biryulyov tells the Financial Times that he now sees two main market drivers in Russia: the commodities cycle and “consumption and economic restructuring”. He thinks investors should look for exposure to infrastructure, as “any development of the economy is going to lead to growth in infrastructure, such as airports, buildings and roads”. He gains exposure through Evraz, which caters for almost 100% of Russian railway needs, and Mechel, a major supplier of metal to construction firms. The trust’s largest consumer play is Pharmacy Chain 36.6, Russia’s largest chemists’ chain. It controls 5% of the country’s pharmaceuticals market and has a presence in 43 regions.
And while Russia’s equity market may look “quite challenging” in the short term, as political factors and a flood of initial public offerings “create a degree of volatility”, the country’s strong economic growth is sustainable, Biryulyov tells Hemscott. You just need to be brave with where you invest you money. “It is very important not to be afraid to take contrarian views,” he says. The trust currently trades on a near-11% discount.
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JP Morgan Russian Securities Fund top ten holdings
Name of holding, % of assets
Sberbank of Russia, 12.50
Open Investments Jsc, 10.40
MMC Norilsk Mickel, 8.80
Mechel AOA, 8.30
Pharmacy Chain 36.6, 5.60
Severstal Auto JSC, 4.10
Comstar United Telesystem, 3.20
Mobile Telesystems OJSC, 2.60
Cherepovets MK Severstal, 2.50
Evraz, 2.50
