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Russia Woes Drag Down Country-Focused Funds

Russia Woes Drag Down Country-Focused Funds

As of January 5, the Market Vector Russia ETF Trust (NYSE: RSX) was continuing the slide that began in July, which accelerated downward in December. In 2014, the ETF skidded nearly 50 percent.

The ETF tracks the MSCI Russia Index, which measures performance of large- and mid-cap companies in the Russian market. 

The news from Russia hasn't been good: A recent hike in interest rates failed to shore up the ruble as intended. 

In addition, Russian stocks have been slammed by the declining price of oil and sanctions imposed by the U.S. and other western nations over Russia's annexation of Crimea

Related Link: Will Others Follow Apple Out Of Russia?

T. Rowe Price Emerging Europe Fund

One of the largest mutual funds with hefty exposure to Russia is the T. Rowe Price Emerging Europe Fund (MUTF: TREMX).

This fund invests primarily in equities of companies located in European countries that are considered emerging markets. It has no constraints in terms of market cap.

The fund, which dropped 35 percent in 2014, counts several Russian companies among its top holdings. Those include:

  • Gazprom OAO (ADR) (OTC: OGZPY)
  • Sberbank Rossii OAO - ADR (OTC: SBRCY)
  • GMK Noril'skiy nikel' OAO (ADR) (OTC: NILSY)
  • Yandex NV (NASDAQ; YNDX)

As far as funds go, this one is on the expensive side, with an expense ratio of 1.51 percent. Actively managed funds, such as this one, typically carry higher expense ratios than indexed funds. Investors are hoping managers can pick investments that will outperform an index. However, when an entire country or region is under selling pressure, stock pickers generally have no advantage over an index.

Related Link: Catalyst Rolls Out New Hedging-Strategy Fund

ING (Voya) Russia Fund

The ING Russia Fund Class A (MUTF: LETRX) ended 2014 with a decline of 41 percent.

This fund, as the name implies, has a Russia focus. It invests at least 80 percent of assets in stocks of Russian companies, with the remaining 20 percent invested in debt of either Russian companies or the Russian government.

Top holdings include:

  • Lukoil
  • Surgutneftegas OJSC
  • GMK Noril'skiy nikel' OAO
  • Sberbank

The ING Russia fund also has a high expense ratio; in this case, it's 2.01 percent.


Related Articles (TREMX + LETRX)

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