Tuesday, 17 April 2007

Allianz pushes money into Russia

Jason Corcoran in Moscow

16 April 2007

Chief executive returns to rebuild Rosno after year of rows and staff departures

German financial services group Allianz and its institutional clients are to invest $1bn (€750m) this year through its Russian subsidiary, Allianz Rosno Asset Management.

The push follows Allianz’s move to take control of a joint venture from Russian partner Sistema, the telecoms group run by oligarch Vladimir Evtushenkov. Sistema sold a 49% stake in Rosno to Allianz in February for $750m after a year of wrangling that led to staff departures. Allianz has become the majority shareholder while Rosno retains a 2.8% stake.

Part of the dispute centred on Allianz’s desire to develop the insurance and fund management operation with shareholders’ funds, while Sistema wanted to carry out an initial public offering.

The rows led Oleg Mazurov to resign as chief investment officer of Rosno last July and join rival manager Renaissance Investment Management. He returned to Rosno three months later as chief executive with a mandate to rebuild the business and rehire colleagues who had left.

Mazurov said: “There was real conflict between management and shareholders, because we were caught in the middle between Allianz and Sistema. There were disputes and shareholders didn’t seem to appreciate that management had to concentrate on making sure the start-up survived.”

The asset management venture was the product of a merger in 2004 of dit Moscow, Allianz’s Russian asset manager for private and institutional clients, and Sistema Investments, manager of Sistema’s assets.

Rosno will be more closely integrated with Allianz Global Investors, a top-five global asset management with fund subsidiaries that include US bond specialist Pimco and Nicholas Applegate, although Mazurov said the manager would retain its independence.

The company manages assets worth $700m in six open-ended investment funds and 12 non-governmental pension funds. Mazurov said funds under management would grow this year, with clients of Allianz, mainly insurance companies and pension funds, set to invest up to $1bn.

Rosno is pursuing institutional investors interested in investing in Russia and the fast-growing $15bn domestic mutual fund market, which is dominated by local rivals Troika and Renaissance.

Mazurov said: “We have had a lot of interest from German investors interested in Russia, and Allianz will be our link to that market. Retail is also a growth area because it is so uncompetitive in Russia, with penetration at just 1% of GDP.”

Distribution agreements to sell mutual funds at state bank Vneshtorgbank branches have been agreed and Rosno may also sell through its life insurance salesforce. Western institutions will be able to invest through Rosno funds registered in Luxembourg.

New Rosno funds will enable Allianz to invest in Russian real estate and private equity, according to Mazurov. “Allianz wants to buy real estate here and we will provide consultancy and ultimately funds,” he said.

Rosno last year won two mandates from the Russian government to manage regional venture funds and will make its first investments in Russian research and development projects soon.

Rosno represents a strategic play in an additional emerging market for Allianz. It is also assessing an asset management joint venture with its Indian insurance partner, Bajaj Auto.

Finnish asset manager FIM this month launched its first Russia-domiciled mutual funds, having received a fund management licence last year.

Jan Forsbom, chief executive of FIM Asset Management, said: “The Russian mutual fund market is roughly a tenth of the Finnish market. We have the competitive edge and experience of investing in Russia to make the most of a big opportunity as its middle class grows and grows.” FIM’s target is to have €200m ($266.7m) under management by the end of the year.

State Street Global Advisors, a US institutional fund manager, ended its seven-year partnership with local manager Pallada Asset Management in 2005. The Russian institutional market has grown slowly compared with its retail counterpart because Russian pension funds keep much of their portfolios invested in their parent companies.

Other western fund managers are rumoured to be setting up shop in Russia. Benelux manager Fortis started a joint venture last year with CIT Finance Asset Management of St Petersburg.


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