Saturday, 29 November 2008

East Capital reveals staff cuts

Financial News

Jason Corcoran in Moscow
28 November 2008

Swedish fund manager East Capital has cut its personnel by a fifth following a 70% slide in its core equity market of Russia over the past two months.

The 40 jobs cuts from East Capital's overall headcount of 225 indicate how the financial crisis in Russia is spreading from investment banks to the buyside.

The Stockholm-based manager said 20 jobs in Sweden would be affected and the remainder in its international offices in Moscow and elsewhere in the CIS.

A statement from East Capital said: "Like many others in these turbulent times, we are carrying out an organisational review…We need to adapt to the new reality."

Hedge funds operating throughout Russia and the CIS are cutting their headcounts and slashing costs following sharp falls in equity prices and increases in clients redeeming their accounts.

Prosperity Capital, previously the leading Russian fund manager, has seen its assets under management shrink to $1.5bn (€1.1bn) from over $5bn over the past few months. It's $1.2bn Russia equity fund has fallen to $400m due to the drop in equity values.

Prosperity's chief executive Mattias Westmann told Financial News that Prosperity had posted some inflows from new clients and little in the way of redemptions.

He said: "We have not closed any funds but we are trying to cut costs in general. No personnel has been affected so far as we have always been a pretty low cost operation."

Prosperity, which was established in 1996, employs just 25 people in Moscow and London.

The closure last month of a Russian hedge fund run by Florin Investment Management has led to fears many more could go under as investors flee emerging markets.

The closure in October of Florin FSU Credit Opportunities Fund, which was invested in real estate and equity collateralised debt, led to 10 lay-offs at the firm in Moscow and London

Another Russian hedge fund, Denholm Hall Russian Arbitage Fund, announced it was considering a restructuring following difficulties. In a letter to investors, Denholm said it was conducting a review of "of the collateral of our loans, the liquidity of our borrowers, the health of the underlying businesses and our hedging strategy".

Meanwhile Da Vinci Capital, which conducted an initial public offering on London's junior Aim market in May, has launched a crisis opportunities fund.

Da Vinci's long-short hedge fund has suffered from redemptions and has fallen to just $15m and it's managers are considering winding it up.

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