Emerging Markets: three funds for risky Russia

Russia is regarded as the riskiest of the Bric emerging markets. We explain why some investors are taking the plunge and highlight three funds that you could add to your portfolios.

We turn to Russia as we conclude our series looking at each of the giant 'Bric' emerging market powers.

We have previously looked at the overall investment opportunities in global emerging markets as well as specific investments in Brazil, India and China.

A fiery past and present

Russia is currently in the news as the country struggles with the wildfires that have swept the region near Moscow, making life difficult in the capital. Without meaning to trivialise the natural disaster, recent events do sum up the themes of abundant natural resources combined with dangerous politics that have marked the country over time.  

For centuries, the story of Russia and its people has been one of potential, hope and disappointment. Likewise, since the fall of the Iron Curtain, investors into the former communist state have suffered a similar fate.

Just as the Russian debt crisis of 1998 was starting to become a distant memory, a second disastrous turn of events in 2008 saw the stock market plummet by around 80% from its peak a year before.

Regardless of how long your time horizon, this is one heck of a rollercoaster.

Geopolitical risks

Furthermore, with strong streaks of isolationism, collectivism, and brutal authority, it is unsurprising Russia is the least loved of the Bric nations. Likewise, the economy ranks alongside some of the most corrupt in the world, while heavy-handed intervention from prime minister Putin's government can make it a challenge for foreign businesses.

So why bother with Russia when it is so fraught with danger? Well, the answer in the minds of most investors is simple: they like Russia because of its incredible natural resources.

In addition to housing a plethora of diverse commodities, Russia recently became the world’s biggest exporter of oil. At the same time it has maintained its spot as the number one exporter of natural gas across the globe.

Play on global recovery

Make no mistake, these are the crown jewels of the global economy and Russia has got plenty of them.