An update on Russia’s Invasion of Ukraine

RUSSIAN CONCERNS

The Russia/Ukraine situation has intensified over the past few days. We can’t yet know the lasting effects, but we are staying focused on ensuring your financial strategies and investments are positioned to minimise risk and deliver your long term objectives.

This communication is to keep you up to date with our early observations regarding the Russian concerns and open a dialogue if you want to discuss your current position and ongoing financial strategies.

Perspective about the Ukraine/Russian situation

This geopolitical event is concerning on practically every level, leaving a wide range of potential outcomes and scenarios. Putting aside views on the way this might evolve, our role is to look at this financially and ensure you are secure. This requires us to avoid prediction and instead use multiple layers of thought.

• Let’s start with the good news – your direct exposure to Russia and Ukraine is negligible. We do maintain exposure to emerging markets given the attractive valuations and diversification, but the weightings to Russia and Ukraine are small. For example, Russian companies only account for around 2.8% of the emerging market basket for equities and around 4.1% for bonds. Ukraine doesn’t even register on the factsheets because it is so small. (Perversely, if prices in these regions fall significantly, the expected reward for buying these markets might exceed the risk – creating a buying opportunity. However, that isn’t the case right now).
• Moving to knock-on effects, the risks are more notable, but we do see some offsetting positives. Again, starting with the good news, the tensions are pushing commodity prices higher. This has supported sentiment toward energy companies, which have done very well for your portfolio of late. We also apply a long term, valuation-driven focus to your investments (preferring cheaper assets) which tend to do well in this kind of environment, so we have another ballast. That said, we can’t rule out an exodus of investor money if things deteriorate quickly i.e. people panicking and selling at the wrong time. We never expect straight lines in markets, and if negativity really takes hold, it could open a world of opportunity to add undervalued assets to your mix.

In case it wasn’t obvious from the above, we are monitoring this situation closely and hearing from a range of industry experts to understand the impact as it evolves. Ultimately, we are keeping a close eye on any consequential impacts and given everything we know (while acknowledging the unknowable), it reinforces the benefits of a long-term, valuation driven approach. In this regard, your investments remain well positioned to navigate this uncertain period, keeping you on the path to achieving what’s important to you in life.

If anything changes, we’ll be sure to let you know, but for now we hope you find this touchpoint useful.

As always, please don’t hesitate to contact us if you have any questions or issues.