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WC 2018 - Russia v. Saudi Arabia: top managers and market views

Ahead of the first match of the World Cup 2018 we look at the outperformers who manage investments in two countries.

All about to kick off

The 2018 FIFA World Cup kicks off today with hosts Russia taking on Saudi Arabia. While neither country can realistically expect to lift the cup in July, here we take a closer look at the investment opportunities in the respective markets.

Saudi Arabia has drawn a lot of attention recently, having been earmarked for ascension to EM status by MSCI. This is while Russia has ridden out volatility and low oil prices, albeit with a soaring currency and a huge number of sanctions imposed upon it.

But, where are the opportunities? Here we showcase the top managers running cross-border funds covering the two markets, while seeing who is top on a three-year absolute return basis. This is as well as hearing how top-rated managers are currently positioned.

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All about to kick off

The 2018 FIFA World Cup kicks off today with hosts Russia taking on Saudi Arabia. While neither country can realistically expect to lift the cup in July, here we take a closer look at the investment opportunities in the respective markets.

Saudi Arabia has drawn a lot of attention recently, having been earmarked for ascension to EM status by MSCI. This is while Russia has ridden out volatility and low oil prices, albeit with a soaring currency and a huge number of sanctions imposed upon it.

But, where are the opportunities? Here we showcase the top managers running cross-border funds covering the two markets, while seeing who is top on a three-year absolute return basis. This is as well as hearing how top-rated managers are currently positioned.

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Please sign in or register to comment. It is free to register and only takes a minute or two.

How the teams line up

It is hard to make an absolute comparison of the managers in charge of Russian and Saudi Arabian-focused funds, as there are no Saudi Arabia-only funds in the Citywire database.

In the Citywire database, there are 44 managers operating in the Equity - Russia space running a total of 50 different strategies. This is while there are 33 managers in the Equity - Middle East & North Africa space overseeing 47 funds.

While the Russian market might be slightly more established in cross-border terms - as evidenced by the top-performing fund having three times the assets of its MENA rival - there is still plenty of room to grow given Saudi Arabia's recent promotion.

Now onto the top players...

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Jelena Rozenfeld, Trigon Capital

Fund: Trigon Russia Top Picks Fund

AuM: €13.6 million

Total return over the last three years (euro terms): 44.33%

Citywire rating: AAA

Launch date: 1 March, 2010

Leading the way in the Equity - Russia stakes is Jelena Rozenfeld of Trigon Capital. She joined the Estonia-based firm in 2010. In the Russia Top Picks fund, Rozenfeld invests in around 25 different stocks, with a focus on the most attractively valued.

At present, the biggest three sectors of the fund are currently materials (20.3%), consumer (18.4%) and financials (16.5%). The majority of the holdings are blue chip companies that have more than €3 billion in market cap.

According to her latest commentary, Rozenfeld said the Russian market has recovered from April’s sell-off that was caused by new sanctions. Rozenfeld added that the Russian market is compelling based on its underperformance, value and current oil price level.

Speaking to Citywire Selector, Rozenfeld said: 'The aim is to find companies that would do better than the market over two to three years.

'We maintain the flexibility of operating outside of any index that allows us to search for fundamental mispricing in the market and act according to our analysis.

'In evaluating investments we place a strong emphasis on cash flow generation and look for opportunities where we can benefit from structural growth.'

The Trigon Russia Top Picks Fund returned 44.33% in euro terms over the three years to the end of May 2018. Its Citywire-assigned benchmark, the RTS CR, rose 12.75% over the same timeframe.

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Fadi Al-Said/Walid Mourad, Lazard AM

Fund: Lazard MENA Inst USD

AuM: $6.3 million

Total return over the last three years (euro terms): 19.46%  

Citywire rating: AAA

Launch date: 3 July, 2013

Taking top spot in the broader MENA market - which includes Saudi investments as a large proportion of the index - are the Lazard AM pair of Fadi Al-Said and Walid Mourad.

Al-Said is based in UAE and is head of Mena at Lazard Asset Management. Prior to joining the firm he has been working at ING Investment management for almost six years. Meanwhile, Mourad started at the firm in 2014 and was also previously was a portfolio manager at ING IM.

The fund’s biggest country exposure at the moment is Saudi Arabia at 38.7%. However this is an underweight against its benchmark, the S&P Pan Arab, Composite LMCap NR, which has 54.4% allocated to the country.

Several Saudi Arabia stocks are currently in the top 10 largest holdings, however. These being chemicals company SABIC, petrochemical manufacturer Alujain, petrochemical company Saudi Kayan and Petrochemical.  

The managers returned 19.46% in euro terms over the three years to the end of May. The fund's Citywire-assigned benchmark, S&P Pan Arab Composite TR, fell 7.35% over the same timeframe.

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What the pundits are saying

Citywire A-rated Andrew Brudenell who looks at Saudi Arabia through a MENA lense said the country is going to attract increasingly more attention following its potential upgrade to the emerging market status.

'If it does move up then people will look at their MENA exposure and this will create opportunities for Kuwait and the UAE. It is not all about oil – for Saudi Arabia or MENA as a whole – but countries such as Jordan and Lebanon have suffered as the price has moved.'

Meanwhile AA-rated emerging markets manager Raheel Altaf is putting his bets on Russia, be it investments or football. The majority of the Russian allocation in his Artemis Global Emerging Markets fund are energy stocks.

‘They offer attractive valuations and their fundamentals are really improving and that's largely driven by the fact that oil prices have been strong and the share prices of the energy stocks haven't kept up with the oil price, they started to play some catch up but we think there's more potential for them.’

Altaf adds that Saudi Arabia’s strongest player is its energy sector, which is much like Russia. He adds that, fundamentally, the economies aren’t that different.

‘We may see the Saudi Arabian equity market achieving emerging status from MSCI and other providers, which is likely to be positive for the sorts of capital market reforms that are needed for an equity market like that.’

However, Altaf says Saudi Arabia will be penalised by the fact that it trades on a higher valuation than the Russian equity market, giving the win to Russia. So, effectively Russia 1 - 0 Saudi Arabia on that front.

Meanwhile, on the pitch, the manager backs the home team, despite them being the worst ranked team in the whole world cup, he pointed out. Final score: Russia 2 – 0 Saudi Arabia

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Related Fund Managers

Fadi Al-Said
Fadi Al-Said
1/11 in Equity - Middle East & North Africa (Performance over 3 years) Average Total Return: 68.05%
Raheel Altaf
Raheel Altaf
32/252 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 67.84%
Jelena Rozenfeld
Jelena Rozenfeld
Andrew Brudenell
Andrew Brudenell
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