Markov Processes International

How Much Russian Exposure is in Your Hedge Fund

Related: PIMCO Income Fund and The Looming Russian Default

A recent Financial Times article (Russia-focused hedge fund takes stock after ‘inconceivable’ Ukraine invasion) highlights a family of funds managed by Firebird Management and known to have some of the largest holdings in Russian stocks.

“Few are more exposed,” the authors note. But they have company: foreign investors currently hold $86bn in Russian equities, and the true exposures may go beyond that due to the interdependencies of outside firms on Russian companies.

Now is the time for fund managers (and other investors) to understand their true exposures to the Russian market; when (and if) it reopens fully, there will be no shortage of sellers and bargain hunters in the mix. This is where fund analysis (via regression against a broad set of market indices) can be a cost-efficient but impactful method of analyzing investments – especially since you don’t need access to the fund positions themselves to credibly assess funds’ exposures.

Using MPI’s Dynamic Style Analysis (DSA), we analyzed approximately 600 equity hedge funds in HFR against global equity indices including FTSE Russia and FTSE EM ex Russia through January 2022. In the chart below, we show the funds’ latest exposures to FTSE Russia (determined by DSA) along the X-axis and the fund’s log-AUM on the Y-axis.


The results in the chart above confirm that all three Firebird hedge funds appear to have some of the largest exposures, right below the 50% thresh-hold. However, we see at least three funds with significantly higher exposure than Firebird’s. One of them – PARVEST Equity Russia from BNP Paribas – appears to have a more than 60% exposure to Russian equities…and more assets than all three Firebird funds combined.

So, how much Russian exposure is in your portfolio?

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