By Ross Kerber
BOSTON, May 14 (Reuters) - Voya Russia Fund manager Nathan Griffiths works from The Hague, but worries he could be trapped in Moscow.
Based in the Netherlands, Griffiths' mission is to invest at least 80 percent of his $128 million fund in Russian stocks.
That is a tough mandate as the conflict in Ukraine roils Russian markets and drives away investors. The fund has lost 17 percent so far in 2014 - dead last among 291 emerging-market funds tracked by Lipper, a Thomson Reuters unit.
Griffiths does his best to limit the fallout. He has loaded up on Russian stocks seen as recession-proof and switched to securities traded outside Russia's borders, hoping to insulate them if the West imposes further sanctions. He thinks Russian President Vladimir Putin is focused more on strategic interests.
"I don't think Mr. Putin cares at all about western investors!" Griffiths said at one point in a recent series of interviews by telephone and email.
The fund - the largest Russia-specific active vehicle for U.S. stock investors - has faced customer cash withdrawals around $70 million in each of the past three years, plus another $17 million taken out in the first quarter.
But outflows slowed in April to just $2 million and Russian markets have recovered from March lows. The investors he has left do not seem so focused on geopolitics.
"People who invest in Russia are aware of the volatility," Griffiths said. "You never quite know what's next."
Russia's support for armed separatists in Ukraine's eastern region, and previously in Crimea, has had a wide impact. On April 30, the International Monetary Fund cut its 2014 growth forecast for Russia to 0.2 percent.
Researcher eVestment estimates institutional investors cut their Russia exposure to $84.5 billion at the end of March, down $26.2 billion from the end of September.
But Griffiths said Russian markets seem to be coming back. Trade ties limit how tough western sanctions might get, he said, and his fund does well enough compared with other Russia funds.
Technically, Griffiths works for the investment management arm of Netherlands-based ING Group NA, which runs the fund sold by Voya Financial Inc in the United States.
Griffiths grew cautious in March and boosted cash levels in the fund. He and a co-manager also moved some shares from local Russian exchanges to depositary receipts on foreign exchanges such as New York and London. Those could offer some liquidity if Western governments launch broad sanctions against the Russian economy, and if the Kremlin responds with asset freezes, he said.
The pair were already using depositary receipts to own companies such NK Lukoil OAO their top holding in March. Griffiths also likes Lukoil's dividend growth, a common reason Western investors are drawn to Russian companies.
(Reporting by Ross Kerber; Editing by Richard Valdmanis and Andre Grenon)
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