Asset Managers

Emerging market bond markets are under pressure. Concerns about whether Russia will make its interest payments this month are leading investors to wonder which other countries are at risk of default.

Billions of dollars of Russian government and corporate bonds are at risk, with as much as two-thirds of the country’s foreign exchange reserves frozen. Russia must make at least $400 million in interest payments over the next ten weeks. Next month, a redemption of no less than $2 billion awaits, according to Bloomberg data.

Even as limited trading resumed on Moscow’s exchange on Thursday, prospects for emerging market funds exposed to Russia remained cloudy as determining accurate asset values continued to be nearly impossible. Fund managers now await guidance from financial supervisors before taking next steps on suspended funds.

Luxembourg is discussing the innovative use of a particular liquidity management tool known as “side pockets” in order to deal with the suspensions of investment funds with significant exposure to Russia.

The head of Luxembourg’s top financial regulator on Tuesday called on the country’s asset management industry to step up its efforts and make sure that Russian oligarchs don’t evade sanctions by hiding their money in European investment funds.

M&G Investments is preparing to transform its Luxembourg hub for further growth in Europe with the objective of generating half of total group revenue within the next few years, its managing director Micaela Forelli told Investment Officer Luxembourg.

It almost sounds like a call to run for the hills. Get rid of your risky assets, go defensive, and play volatility as an asset class. Sell European equities and buy Swiss. Now that the Russia-Ukraine war shows no signs of abating, Christophe Donay, Chief Strategist at Swiss-based Pictet Wealth Management, fears that excessive global debt has made the world economy vulnerable to a new systemic crisis. 

There are a number of important events expected this week that will affect investors. The most important is undoubtedly the decision of the Federal Open Market Committee (FOMC) on US interest rates on Wednesday.

Impact investing looks to put investment money to work on bringing about measurable change in the poorer societies of the emerging and frontier markets as well as improving the environment. With the successive shocks of Covid and now the Russian invasion of Ukraine rocking Europe and the West, Philipp Mueller, the CEO of BlueOrchard explains that the residents of countries in its markets can provide inspiration for our wealthier society. The key word: resilience. 

For a second time in two years, investment fund managers have been ordered to directly report significant redemptions as the CSSF, the Grand Duchy’s financial supervisor, stepped up its monitoring of the impact from the war in Ukraine and the international sanctions against Russia.

The financial industry often baulked at the tens of billions of euros it pays for EU’s comprehensive regulation framework put in place post 2008 financial crisis. With markets in turmoil over Russia-Ukraine, that tone now is different.