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Despite massive swings in the key Russian commodity, crude oil, Russian equities were able to produce a stellar return of 14% for the first three months of the year.  Our largest positions in blue chips such as Lukoil, Sberbank, Gazprom and Rosneft significantly added to the Fund’s positive contribution – benefiting from increasing oil prices from an intra-low of $27/barrel, and green shoots of economic data (Russia services PMI achieved 50.9 as of 29.02 and 52.0 as of 31.03; industrial production showed a growth by 1.0% in February) Coming from a very low base, this is why Russian equities could dramatically outperform many emerging markets. Economic sanctions continue to take its toll on the GDP, currently at -3.8% but Russia has managed its fiscal budgets also thanks to a weakening of the ruble.  The preliminary quarter 1 current account surplus came in at $11.7 billion.  Unemployment is 5.8%, which is just under half of what the Euro-zone has to battle (-10.3%) and inflation is currently 7.3%.  Russia manages to keep its debt burden at very manageable levels, 13.5% vs GDP, among the lowest in the world. The hugely important US Presidential election on November 8th this year will dictate if economic sanctions stand a chance to be lifted shortly. The blitz war support for Syria helped provide stability for the current regime and looks like it earned President Putin domestic as well as foreign recognition for taking action instead of just talk. Source: Bloomberg

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