Choose Neptune for a Russian risk injection

IC TIP RATING

Tip style: GROWTH

Risk rating: HIGH

Timescale: LONG TERM

"Ignore what's going on in the Ukraine," says Mr Yearsley. "The market is cheap which presents a good opportunity over the long term, so last week I decided to buy more of this fund."

It is a fund with a style that's pure growth and so has a 12 month yield of just 1.59 per cent. Morningstar data shows over three years it lost 39.86 per cent and over one year it lost 18.69 per cent, which puts its performance below its benchmark index, which lost 34.60 per cent and 15.35 per cent respectively over those periods. But since inception in December 2004 the fund has returned 216.8 per cent, almost twice that of the benchmark's 131.5 per cent gain over the same period.

Fund manager Robin Geffen has been investing in Russia for over 20 years and is committed to investing in the Russian stock market using Neptune's team based research process. The team's research analyses the economic forces and global industry trends influencing Russian companies, which allows Mr Geffen to position the fund in the areas he believes are most likely to outperform, with a particular focus on large stocks.

The portfolio is focused on energy (25.1 per cent), consumer staples (16.2 per cent), telecoms (13.6 per cent) and financials (11.2 per cent). Mr Yearsley likes this mix because it's not as heavily focused on energy stocks as some Russia funds. Energy companies make up 57.15 per cent of Neptune Russia & Greater Russia's benchmark index, MSCI Russia Large Cap.

Despite tension with the Ukraine, managers of broad emerging markets funds such as Matt Linsey, manager of the GAM Star North of South Emerging Markets Equity Fund (IE00B5NTY067), also believe Russia currently offers a promising alternative to other emerging markets and frontier markets such as Nigeria. He says that despite Russia's considerable political problems, the region still offers value.

But other analysts don't agree. Jason Pidcock, co-manager of the Newton Emerging Income Fund (GB00B8HVVL95), says Russia is a "value trap". He believes share prices are cheap for a very good reason. "I would rather invest in countries and companies in which we have greater understanding and trust, even if that means paying a premium to own them," he says.

The ongoing charges are 1.9 per cent, which is reasonable for an esoteric single region fund, and there is no performance fee. However this is one of the riskiest funds you could put your money in. But if you're looking for strong returns over the long-term, can tolerate high risk along the way and already have a diversified portfolio, put some money where most investors won't dare to go. Buy.

Source: Morningstar

Performance data as at 4 April 2014

 Top 10 Holdings as at 31 December 2013