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Georgia's a good lesson in risk management


Russia's military action against Georgia was quite the jarring turnabout for a country that was thought to be so tame that mutual funds managers here in North America have gone and loaded up on its stocks. And then there's the whole resource issue. Russia's a commodity-based economy - lots of oil and gas - and that should be a concern to investors who are heavily exposed to Canadian energy stocks and worried about a downturn in the sector. So which funds have ventured deeply into the land of Lenin, Stalin and Putin?


Funds in all global categories, including emerging markets, were ranked according to their exposure to Russian stocks as of their most recent portfolio disclosure to One-year return data are included to provide some perspective on how the fund's Russian exposure has worked out.


Enough data to show that if you own an emerging markets fund, you've potentially got a fair degree of exposure to Russia. This is especially true if you own the BRIC variant on the emerging market there, which focuses on Brazil, Russia, India and China. BRIC funds from Franklin Templeton and HSBC had 23.1 and 16.4 per cent of their assets, respectively, invested in Russia.

Holding Russian stocks is like investing in any emerging market - you get big upside potential coupled with the risk of big losses. The main Russian stock index, the RTS, was off about 33 per cent from its May peak through the latter part of this week (as measured in U.S. dollars), and it was down about 15 per cent from its level before the Georgian conflict began. That followed a surge of about 50 per cent from August, 2006, to the May peak.

Emerging markets funds have generally been money losers over the past year, as have pretty much all global equity funds. Don't go blaming Russia exclusively, although it has been dead weight lately. Instead, think of Russian stocks as an example of the kind of risks you take on when investing in emerging markets or BRIC funds.

Funds with Russian Exposure

NameEquity categoryAssets ($million) as of July, '08Latest MER (%)Latest reported holiday dateRussia holding (%)Quartile 1-yearReturn 1-year (%)
Excel Emerging Europe AEuropean 16.2-7/31/200853.7--
Templeton BRIC CCEmerging markets330.22.976/30/200823.11-0.10%
HSBC BRIC Equity-IEmerging markets104.12.737/31/200816.41-0.50%
Fidelity Emerging Markets-AEmerging markets483.196/30/200815.44-10.90%
United Emerging Markets CC-AEmerging markets0.32.676/30/200813.9--
SEI Emerging Market Eq.-OEmerging markets151.60.26/30/200811.73-8.00%
CI Emerging MarketsEmerging markets212.42.587/31/200811.22-3.50%
CIBC Emerging Markets IndexEmerging markets130.81.286/30/200811.12-4.40%
BMO Emerging MarketsEmerging markets131.72.824/30/200811.14-10.60%
United Emerging Markets Pool-WEmerging markets186.30.237/31/2008111-1.80%
TD Emerging MarketsEmerging markets254.32.767/31/2008114-11.90%
HSBC Emerging Markets-IEmerging markets22.32.737/31/200810.83-9.10%
Renaissance Emerging MarketsEmerging markets222.97/31/200810.34-12.60%
National Bank Emerging MarketsEmerging markets102.82.857/31/20089.93-9.20%
Altamira Global DiscoveryEmerging markets37.23.37/31/20089.83-9.10%
Fidelity Europe-AEuropean 101.52.666/30/20088.81-2.00%
CIBC Emerging MarketsEmerging markets83.62.936/30/20088.24-10.60%
Mackenzie Cundill Recovery 'C'Glbl Small-Mid Cap 1,565.202.457/31/20087.62-20.20%
Tmpltn Emerging MarketsEmerging markets304.22.976/30/20087.23-10.20%
Mackenzie Cundill Em Mkts Val cl-AEmerging markets280.22.847/31/200874-27.70%
Mackenzie Univ Wld Resource clNatural Resources 204.32.467/31/20086.935.30%
GGOF Emerging Markets MutualEmerging markets282.747/31/20086.41-1.40%
IG Mackenzie Univ Emerg Mkt cl-AEmerging markets168.23.035/30/200862-6.60%
Mackenzie Univ Canadian ResourceNatural Resources1,549.302.417/31/20085.126.00%
Mackenzie Univ Emerg Markets clEmerging markets134.62.467/31/20084.83-7.40%
Dynamic European ValueEuropean 62.72.65/30/20084.64-29.80%
Manulife Emerging Markets FundEmerging markets9.82.97/31/20084.6--
Fidelity Global Telecommun-AScience and Technology3.62.876/30/20084.42-14.50%


© 2007 The Globe and Mail. All rights reserved.

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