Diamond Age Russia Fund: Monthly Letter to Investors – July 2012

In July, the Fund gained fractionally +0.38%, and, in fact, delivered on the Investment Advisor’s promise to meaningfully decrease volatility. Here are the weekly returns since the Fund’s portfolio was re-configured to produce more stable and low volatility returns: +2.40% (week ending June 8th), +2.55% (June 15th), -1.50% (June 22nd), +1.97% (June 29th), +0.50% (July 6th), +0.34% (July 13th), -0.38% (July 20th), -0.07% (July 27th).

The outlook remains bullish for US equities, with the forward 12 month earnings yield for the SPX versus the 10 year Treasury yield standing at 7.8% versus 1.65%. Being a locomotive of the global equity market, the US market is likely to reflect constructively on emerging markets equities, including Russian and CIS stocks.

The biggest risk to the Russian market is Russia itself (please see a Der Spiegel recent article attached). And yet, Russia and emerging markets, especially in Asia, still represent huge potential going forward, as one of Russia’s richest businessmen recently pointed out (please see his article attached).


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