Skagen’s Falnes: we are at ‘peak exposure’ to Russia

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Skagen’s Kristian Falnes has said the €5.3 billion Global fund is near the limit of where a ‘sensible portfolio’ should be in terms of exposure to Russia but is sticking to his guns.

In an investor update, the Stavanger-based manager said he currently has 6% exposure to Russia in the Skagen Global fund.

Falnes, who is one of five named managers on the fund, said he has not been swayed to reduce exposure due to the on-going conflict in Ukraine and is using Russia as a diversified, emerging market play.

He said: ‘The current situation in Ukraine and the possibility of increased Russian sanctions has sparked considerable capital out-flow from Russia as risk premiums have increased, although Skagen Global has continued to hold its positions.’

‘History tells us that investments made in times of a 'disaster' have generally been successful as a rule of thumb. If you take the example of the Fukushima nuclear disaster three years ago, investors were fleeing from Japan but in retrospect that was a huge buying opportunity.’

Resisting Russia

Falnes said the team had considered the potential to add more holdings in the country but had resisted temptation due to risk management requirements.

‘At six percent the proportion of Russian stocks is probably close to its peak in a sensible global portfolio, both from the perspective of direct exposure to the country and indirectly to a fall in the oil price,’ he said.

The team currently holds a 1.95% position in oil and gas giant Gazprom, as well as minor positions in banking group Sberbank and consumer discretionary stock CTC Media.

Speaking to Citywire Global last month, Falnes said he continues to favour emerging market countries over developed markets in his blockbuster fund. This saw him name South Korea as one of his favourite markets to back and he has taken a significant overweight here.

The Skagen Global fund has returned 18% over the past three years. This compares to an average manager return of 14.3% in the Equity – Global Equities sector over the same timeframe.