Wednesday, 27 June 2007

Russia's Renaissance expands into Middle East and Southeast Asia

Business New Europe

Jason Corcoran in Moscow

Russian investment bank Renaissance Capital is opening offices in Dubai, Singapore and Hong Kong to service its fast growing wealth and asset management business, bne has learnt.

Its expansion overseas is underpinned by a conviction that Russian private investors will want to diversify their portfolios and invest more abroad amid uncertainty ahead of next year's presidential election.

Stephen Jennings, chief executive of Renaissance Capital, says the Asian openings stemmed from existing Russian and CIS clients demanding access to key international finance markets.

In an interview with bne, Jennings said that clients within Russia and the CIS want international assets, and international custodian and wealth management services.

"As we go into other geographies, we will sell those same products to local clients in those markets also. It's about giving really tailored wealth management products to high net worth Russians, Ukrainians, Kazakhs and so forth," he said.

Renaissance's fund arm Renaissance Investment Management is Russia's market leader with almost $4.5bn in assets under management. Jennings said more than half of assets were accounted for by high net worth clients.

Domestically, Jennings welcomed the arrival of global wealth management players to Moscow, but suggested their strategy might not be best suited to Russia's ultra rich.

"UBS and Credit Suisse are tailored towards a global business. They would say otherwise, but their product is quite standardised. What we are dealing with in Russia is a completely new class of wealthy people. They are used to exceptionally high levels of service in other areas of their lives. They are not getting that highly tailored and high-end service from someone who is a generic wealth provider," he said.

UBS launched limited onshore private banking services in Russia in January, hot on the heels of Credit Suisse which launched in September last year. Other competitors in the onshore market include market leaders Deutsche Bank, Citigroup and Austria's Raiffeisen. UBS is offering wealth management, asset management, ruble fixed-income and foreign-exchange services alongside their existing Russian operations in equities and investment banking.

Jennings argues Renaissance can provide clients with a higher level of service along with best-of-breed products through white-labelling - the selling of externally managed funds that are branded as its own.

"It's not an option for us to give people anything but a Rolls-Royce service," he said. "International products are all available through white-labelling and open architecture so there is nothing by way of product that an international bank can provide that we can't. What we can do that is different is the tailoring of products, including domestic products, the location of service and the whole nature of the relationship."

Africa and elsewhere

The bank is targeting the top segment of the market and clients with a minimum investment size of $1m. Actually, the average account size is in excess of this, at over $6m, while the largest single account is just above $100m.

Renaissance recently launched its investment bank in Sub-Saharan Africa. Asset management and wealth management services will follow in time, according to Jennings.

The move to set up operations in Asia and the Middle East follows the recent launch of operations in Geneva, the backyard of the Swiss wealth management giants.

Philippe Magistretti, head of private banking at Swiss bank Union Bancaire Privee, has been hired to run the business. Magistretti joined UBP in 2004 from Lazard Freres, where he was a partner. He was previously head of the French derivatives operation for the US insurance giant American International Group. His new title is chief executive of Renaissance Investment Management Switzerland.

Renaissance has received a Swiss banking license and is looking to increase its headcount in Geneva from six to 15 by December.

Both Jennings and his deputy Neil Harvey insist Renaissance's overseas expansion is not a hedge against Russia.

"We are 110% focused on Russia," said Harvey. "We have a unique model suited to frontier-type capital which we are applying elsewhere."


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