Russian holdings in light of possible index changes

Recent sanctions imposed by the United States and the European Union prohibit trading in new securities issued by a collection of Russian banks. The sanctions have generated plenty of coverage by news organizations, and the reporting has recently focused on the ramifications for index providers. Will index publishers change how the banks are represented in the indices (or perhaps eliminate them altogether)?

It is hard to predict how the index adjustments will play out. What’s more certain to us is that Russian issuers will remain meaningful index constituents, with the potential to influence index returns and perhaps add a measure of volatility along the way. Going forward, our team approach will be the same as it has always been: We will view the markets through a constructive lens, remembering that over the long term, volatility has the potential to generate favorable opportunities for certain investors who can spot genuine mispricings.

Investing involves risk, including the possible loss of principal.

The views expressed represent the Manager's assessment of the market environment as of August 2014, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

8/25 (13071)

8/25 (13072)

Notes from the desk