Elchin Jafarov

Portfolio Manager

Citadele Asset Management


Russia and the CIS offers emerging market value, economic growth, growing stability and one of the world’s largest consumer markets all in a region boasting some of the largest reserves on the planet. The WIOF Russia and CIS Performance Fund allows investors to take advantage of the region’s enormous potential.



Favourable developments on commodity markets and abundant liquidity have combined to give Russia and the CIS strong momentum for the future. The drivers of the region – Russia, Kazakhstan and Ukraine - are now in stable macro shape and set for continued outperformance. The market outlook for the region is positive with strength in export-oriented industries expected to push through to domestic demand, and regional valuations still leaving good value. In Russia, for instance, the equity market is, based on conventional valuation methods, one of the cheapest of all emerging markets. Meanwhile, in the Ukraine, stock market growth has been among the highest in the world over the past decade. The region is also a net exporter of energy resources, one of the largest exporters of agricultural products in the world and its countries’ public debt burdens (as a percentage of GDP) are at levels between one quarter and two thirds of the EU member states’ average. Meanwhile, cash flows from commodity exports continue to fuel internal growth and demand, providing strong potential for consumer-oriented sectors.



Many investors are aware of the region’s standing as an oil giant but what is sometimes overlooked is its wealth in other reserves. It has the second largest proven reserves of natural gas in the world after the Middle East. Hydrocarbons are one of the key drivers of the region’s growth in domestic demand, infrastructure development, financial independence and stability, but to see the full extent of what the region offers, some selected “non-oil” facts should be considered:


  • Russia alone has more than USD500bn of international reserves (foreign exchange and gold reserves)
  • Kazakhstan holds more than 90% of the elements from the periodic table.
  • The region is among the world’s leading producers and exporters of diamonds, uranium, iron ore, steel, nickel, platinum, chromium, zinc, lead and many other hard commodities, which are all seeing growing demand globally.
  • The Tien Shan gold belt in Central Asia is the second largest gold belt in the world.




With impressive growth rates and potential, in terms of GDP per capita, CIS countries still lag far behind their European peers, implying plenty of space for further growth. Other fundamentals in the region underline its attractiveness for investors. The pace of economic recovery is outstripping expectations while the political environment – a significant risk factor for investors in the past - is becoming more stable. As the region moves forward economically investment will also be needed and events such as the 2014 Winter Olympics and the 2018 World Cup, both in Russia, will give a further boost to infrastructure investments.




For the remainder of this year, attention will be focused on macroeconomic data both from the developed and developing markets. While on the one hand high energy prices are beneficial for a wide range of companies, on the other they can hurt global economic growth, dampening demand for commodities in general. In our view, emerging market players such as China will have a crucial role to play in building investors’ expectations for the commodity sector. Economic difficulties in this geographical segment may lead to a significant correction of commodity prices and direct pressure on commodity-rich CIS equities. But we believe that overall this year will be positive for commodities with increasing demand from both emerging and developed economies. We expect a reaction from investors to the end of QE2 and possibly higher interest rates in Europe, which could lead to a significant extraction of liquidity from markets. However, considering the CIS region’s 20-30% valuation discount compared to developed peers, we are fundamentally positive on equity price dynamics for the remainder of the year.


The Fund is managed by one of the biggest asset managers in the Baltic region, Citadele Asset Management (Citadele AM). Citadele AM is the asset management arm of Citadele banka, one of the leading financial groups in the Baltic States. Citadele AM is the largest investment company in the Baltic region and via its subsidiaries also operates in Lithuania, Russia and Ukraine.

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.