25th February 2022

Russia Ukraine Outlook: Copia’s view on the impact on our portfolios from the Russia Ukraine conflict

A relaxed read on the issues of the day

Military tensions between Russia and Ukraine have dramatically escalated over the last few days and the situation remains extremely fluid. While a lot of details remain unclear about the response NATO allies might take, the current volatility in geopolitics and stock markets is unlikely to ebb anytime soon.

Markets are in a “Risk-Off” mood as global equities dropped 4%, compounding the losses seen in January due to worries around high inflation and the prospect of Central Banks raising interest rates as they prepare to battle inflation. This month has seen a perfect storm in terms of negative risks materialising.

Due to their binary nature, these events are highly unpredictable, and it is extremely difficult to hedge such risks, but our approach of having diversified exposure to various asset classes and geographies works best in such instances.

Market Outlook

The Western countries are likely to condemn Russia’s actions and impose heavy sanctions. As Russia is one of the largest Oil and Gas producers of the world, such sanctions are likely to keep Oil & Gas prices elevated over the near term, adding to the inflationary pressures experienced by developed economies. It is likely Central banks will not be deterred by this geopolitical uncertainty and will look to push ahead with their plans of hiking interest rates. Part of the sell-off in equity markets is attributed to this expectation. 

Although the situation is tense, history has shown that stocks typically take such geopolitical events in good stride. However, we do note that every situation is different, but we believe that eventually this uncertainty will be lifted, and markets will stabilise.

Portfolio positioning:

As we entered 2022, we took some risk off the table and positioned all our portfolios defensively as the Copia Risk Barometer (a quantitative, forward-looking indicator of market outlook) entered the Amber zone citing a cautionary outlook to equities. In hindsight, this prudent positioning has helped shield the portfolio from some of the losses experienced in the near term.

Equity holdings have also been reviewed, both for regional exposure and for fund selection. Where a portfolio had a strong growth bias, funds with a value tilt have been recommended to temper this and the risks of funds known to have a strong growth bias have been flagged, prompting a reduction or replacement in holdings.

Our exposure to Russia and Ukraine come from the Emerging Market equities and bonds we hold in the portfolios, and remain negligible as shown in the table below:

Stress test:

 We continuously stress test our portfolios for large unpredictable negative shocks. These do come around once in a few years and is a part investing. Our message in these tough times have always been to keep calm and stay invested. Once the dust settles, markets eventually tend to bounce back as it has done in the past time and again.


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    Copia Capital Management

    Hamilton House, 1 Temple Avenue, London, EC4Y 0HA

    Understanding the risks

    This information is intended for professional financial advisers only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such. Model investment portfolios may not be suitable for everyone. The value of funds can increase and decrease, past performance and historical data cannot guarantee future success. Investors may get back less than they originally invested.

    Copia Capital Management is a trading name of Novia Financial Plc. Novia Financial Plc is a limited company registered in England & Wales. Register Number: 06467886. Registered office: Cambridge House, Henry St, Bath, Somerset BA1 1JS. Novia Financial Plc is authorised and regulated by the Financial Conduct Authority. Register Number: 481600.

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