Portfolio Manager, Mark Riggall, explains how Milford is navigating this challenging time for its investors.

Recent geopolitical events, culminating in the Russian invasion of Ukraine are sadly a concerning development from a humanitarian perspective. These developments are also causing significant market volatility and understandably making investors nervous.

Milfords funds have been well placed to weather this volatility. We turned cautious on the outlook for sharemarkets at the start of the year. This wasn’t entirely due to geopolitical risk, but rather the uncertain outlook for growth given rising interest rates this year.

Our funds have been holding higher levels of cash, reduced exposures to shares and been positioning in companies that can benefit from this situation – for example resource stocks given rising commodity prices. We also have no direct exposure to Russian companies or the Russian economy.

Sharemarkets have already corrected meaningfully this year with US markets falling around 10% whilst Aus and NZ correcting around 5 and 9% respectively. Given the rapidly evolving situation, it is reasonable to expect further volatility in both directions for sharemarkets going forward.

It is possible that the Ukraine situation passes without major impact on the global economy. Russia’s economy is small at around 2% of Global GDP and sanctions, thus far, look limited in their impact on broader global activity. However, this still leaves us cautious on how economies and markets will handle the global interest rate hikes that are expected this year.

This calls for a nimble approach, with an open mind as to how the outlook is changing and what the appropriate investment stance is. Our funds have the flexibility to implement a rapidly changing investment view and our investment team is focussed on uncovering the opportunities that arise in such volatile markets.