Russian Exposure in Collingbourne’s Portfolios
We’re just writing with a quick update on the exposure of Collingbourne’s portfolios to Russian securities, in case this is of concern to anyone who we haven’t spoken to directly about the subject.
This specifics in this note relate to Collingbourne’s standard model portfolios. Some clients have bespoke versions of these portfolios, catering to specific circumstances or preferences. If you believe this applies to you and you would like to know the specific details for your portfolio, please contact us directly and we can get this for you.
Details are set out in the remainder of this note, but the main points are:
a.) Exposure to Russian equities is very small
b.) No Russian bonds are held
c.) Russian equity exposure has been reduced since 2014 and all new share purchases halted since January
d.) Remaining shares will be sold once market conditions allow
Growth Assets / Equity Investments
Russian equities (shares) are held in the two Emerging Markets funds in our portfolios. None are held in any developed market funds, nor within the property securities fund within our portfolios.
As at the end of February the proportion of the two Emerging Market funds invested in Russian shares was 0.35% and 0.23% respectively.
The proportion of the total equity component of our portfolios invested in Russian assets was just 0.04%, as at the end of February.
Defensive Assets / Bond Investments
No Russian bonds (government nor corporate) are held in our portfolios. Only highly rated bonds issued in developed countries are held.
You may have heard about Russian bonds being downgraded to ‘junk’ status and that a default is imminent. This will not affect your Collingbourne portfolio, as no such assets are held.
How has Exposure to Russia Changed?
The investment manager of our preferred Emerging Markets funds took the decision following the annexation of Crimea in 2014 to reduce their exposure to Russian securities heavily. As such, a much lower proportion of our Emerging Market assets were invested in Russia than the market average*.
In January this year the investment manager (of the Emerging Market funds) took the decision to halt purchasing any new Russian securities in response to rising risks of sanctions on Russia.
Next Steps
The investment manager’s plan is to divest all Russian holdings from the Emerging Market funds as market conditions allow. Timing will depend on market liquidity and the functioning of settlement and clearing services. They will obviously also need to comply with all applicable regulations and sanctions during the process.
Concluding Comments
We understand that clients may have concern over exposure to Russian assets from both a moral and a financial standpoint, following recent tragic events in Ukraine. Hopefully this note will reassure you that a.) your exposure will be very, very small (far smaller than typically daily market movements) and b.) what little there is, will be disposed of once practically possible.
Please feel free to contact us if you have any questions about this note or you wish to discuss any aspect of your portfolio in greater detail.
*As defined by the main Emerging Market indices provided by MSCI and FTSE.
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