H2O Asset Management said it is keeping up with its openness to the Russian ruble in part because exiting its positions would be a gift to Vladimir Putin. H2O sent the letter after two of its funds with wagers on the ruble had record misfortunes of over 15% on Monday in the midst of market unrest after Russia attacked Ukraine, Bloomberg News revealed. The 1.39 billion-euro ($1.5 billion) H2O Multibonds fund and the more modest $50 million H2O Multi Emerging Debt fund declined by at minimum a further 3.5% on both Tuesday and Wednesday, as indicated by information gathered by Bloomberg.
Coming into February, the Multibonds fund had 48.3% of gross exposure in the ruble, according to an investor document seen by Bloomberg.
“We consider that selling Russian assets, among which currencies, at such discounted rates is a counterproductive ‘gift’ to buyers, among whom the Russian government,” London-based H2O said in a letter to investors seen by Bloomberg News.
The March 3 letter addressed the performance plunge and said the asset manager was holding on to its Russian currency exposure for a number of reasons, including expectations that the foreign exchange market will keep operating and that the ruble is more likely to rise than fall. H2O also told investors it believes its positions are hedged by other market movements.
