Tuesday, 16 September 2008

Partners make millions on sale of fund management stake

Dow Jones 'Wealth Bulletin'

Jason Corcoran in Moscow - 16 September 2008

Partners make millions on sale of fund management stake

Charlie Ryan and Boris Fedorov, co-founders of UFG Invest, will share about $65m with the Russian fund manager's managing partner following the sale last Thursday of a 40% stake to Deutsche Bank.

Former Russian finance minister Fedorov, Deutsche Bank Russia chairman Ryan, and UFG Invest managing partner Florian Fenner, together own 95% of UFG Invest. The remaining 5% of UFG Invest is owned by fund managers and staff.

Financial terms of the sale were not disclosed but a source close to UFG said the German bank had paid about $65 for the minority stake. UFG Invest and Deutsche Bank declined to comment on the price of the sale.

The deal comes just five years after Deutsche first looked at buying the operation for a fraction of that price during its approach for UFG Investment Bank.

Ryan and Fedorov also masterminded the 40% sale of UFG investment bank for $70m to Deutsche in 2004, and the remaining 60% for a reported $600m in 2006.

A source close to UFG told Wealth Bulletin: "Deutsche looked at buying UFG Invest at the same time as the investment banking deal. They decided the assets under management of $30m were too low to make an impact and they launched DWS instead. The outcome in today's equity markets makes Charlie Ryan look like a genius."

Deutsche is to combine UFG Invest with the Russian unit of its DWS Investments division. Artem Beresnev, acting chief executive of DWS Investments in Russia, is to relinquish his role following completion of the merger.

Beresnev had been acting head for a year following the departure of Elena Loginova to take charge of Pioneer Investments in Russia. A Deutsche Bank spokewoman said Beresnev would pursue other opportunities and it was too early to discuss other potential layoffs.

German national Fenner, who joined as managing partner in 2002, is to become chief executive of the combined Deutsche UFG Capital Management business.

DWS said it was unlikely the two fund ranges would be merged. Its investors will probably be asked to redeem and reinvest with UFG.

DWS manages $53m in four mutual funds while UFG runs $630m under management on behalf of 30,000 private investors, as well as pension and insurance funds.

As part of the deal, Deutsche has an option to purchase a 20% stake in UFG's offshore hedge fund business UFG Advisors.

The Russian retail fund management market has struggled to take off and redemptions have been high with stock markets tumbling 50% since May.


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