Monday, 23 February 2009

Swedes lose patience with Prokhorov

Financial News

23 February 2009

By Jason Corcoran

Letter from Moscow

Moscow’s mild-mannered Swedish investors are mad as hell and are not going to take it any more. Prosperity Capital and East Capital are two of the largest and longest-serving fund managers operating in Russia. The two firms have historically adopted a softly-softly approach to engaging with errant Russian corporates, but those tactics have recently proved as useful as lighting a match in a Siberian snowstorm.

Prosperity, whose founders have been investing in Russia since 1992, is warning of another Yukos blow-up occurring because of a major dispute it has with Russia’s wealthiest oligarch Mikhail Prokhorov over the regional power-generating company TGK-4.

Prosperity, along with other minority shareholders, took a hit when Prokhorov’s investment holding company Onexim reneged in September on a deal worth close to $1bn to buy back minorities. Prosperity has since been appointed as de facto spokesman by East Capital and a bevy of western portfolio investors, to defend their interests.

The comparison with Yukos, whereby the company was stripped of its assets and its founder Mikhail Khodorkovsky was jailed, is overstated although the number of western financial institutions being dragged into litigation is going up.

Prokhorov’s Onexim, which has a 50% stake in TGK-4, has issued a flurry of lawsuits against Deutsche Bank, Citigroup, Morgan Stanley, Clearstream and other minority shareholders. Onexim has disputed its obligation for the mandatory buyout of the minorities and has won recent cases in court against Halcyon Advisors and Deutsche. The larger minorities continue to defend their position while Morgan Stanley and others have settled.

Prosperity has received backing from the main market regulator, the Federal Service on Financial Markets (FSFM) and various ministries and even made its case to Russia’s Prime Minister Vladimir Putin, but to no avail. And just like the news anchor in the seminal US film Network, the Swedes have reached the end of their tether and are beginning to shout their discontent from the rooftops.

A release last week by Prosperity described actions taken by Prokhorov’s Onexim group as “a stark example of legal nihilism”. It said: “Prokhorov’s Onexim Group is now inflicting serious damage on Russia’s reputation as a place to do business. The company’s latest statements on the TGK-4 situation are dishonest, self-serving and plain wrong – and everyone involved in Russia’s financial markets knows it.”

Onexim, a Cyprus-registered investment group, has responded by calling Prosperity’s management “speculators” and “foreigners” because they raise their money from overseas.

Disputes between minorities and controlling shareholders are on the rise in the recently deregulated utility sector and other sectors where controlling shareholders face the squeeze.

Prokhorov, however, is king of the cash pile after selling his stake in metals giant Norilsk Nickel last April at the top of the market for an estimated $10bn.

Moscow financiers say the spat reflects badly on local brokerage Renaissance Capital, which Prokhorov took a 50% stake in last October at a knockdown price of $500m.

Renaissance may want to rein in Prokhorov but its hands could be tied trying to put out fires elsewhere. One banker said: “Renaissance’s great reputation in the market with investors is being tarnished by association, but it could be the case that Prokhorov has them over a barrel.”

Sunday, 22 February 2009

Architect Of UBS' Onshore Russian Business Leaves

Wealth Briefing

Jason Corcoran in Moscow

Michael Kuenzi, the architect of UBS's Russian onshore wealth management business, has left the group to pursue other challenges, WealthBriefing understands.

Mr Kuenzi, a German national who spoke excellent Russian, left UBS two weeks ago having built up the business from scratch since 2006.

A source close to the Swiss bank said Mr Kuenzi had been replaced on an interim measure by Russian Dmitry Fedossov, who has a background in products and services.

"UBS remains committed to this important and developing market and we are continued to build our presence," said the source.

Steven Meehan, recently appointed as chief executive of UBS in Russia, said growing wealth management would be one of his main priorities.

UBS opened a representative office in Moscow in 1996, and entered into a joint venture with local brokerage Brunswick in 1997. In 2004, UBS purchased the remaining stake in the joint venture, and re-branded the business as UBS in 2005.

In 2006, UBS received a banking license from the Central Bank of Russia, allowing it to offer wealth management, asset management, rouble fixed income and foreign exchange services onshore.

UBS declined to comment.

Despite projections of massive growth, the onshore private banking market remains small by international standards with many Russians preferring to keep their money in the Caymans or Cyprus.

Credit Suisse, one of the pioneers in Moscow, estimates the nascent Russian private banking market has about $15 billion in assets, with the potential to grow to $400 billion.

It is this potential which lured many international players such as HSBC and Union Bancaire Privée to set up private banking shops in Moscow last year.

The current credit crisis has put on the squeeze on Russia's billionaires who are facing depressed equity valuations, difficult refinancing activities and an increasing number of margin calls from Western financial institutions.

This environment, however, may ultimately benefit international private banks, according to Alexander Kotchoubey, head of international development for Russia and Eastern Europe at Lombard Odier.

"Family offices in Russia who have built up a staffing of 25 analysts and investment hurdles of 30-40 per cent are no longer sustainable," Mr Kotchubuey told WealthBriefing.

"I think we are going see many of these operations collapse into the arms of the banks," he added.

Russian M&A expected to rise amid crisis

Financial News

Jason Corcoran in Moscow

19 February 2009

The economic crisis is starting to trigger mergers and acquisitions in Russia and could lead to the formation of new national champions, according to a report by Italian bank UniCredit.

Recent deal activity has seen the takeover of London-listed, Russia-focused Imperial Energy by India's state-run energy giant ONGC.

Other deals in the offing include the bid by Polyus Gold, Russia's largest gold producer, for KazakhGold, and Russian gold producer Peter Hambro's proposed all share acquisition of iron ore producer Aircom.

The report from UniCredit said: "We expect the trend to continue, likely expanding to larger companies, as the correction of commodity prices and lack of financing should stimulate companies to search for synergies in alliances with rivals and repair balance sheets."

Steven Dashevsky, head of equities at UniCredit in Moscow, said: "Clearly we can see a lot of appetite for M&A for mid-cap deals. They are becoming more affordable and more digestible. The next step is the super-mergers. "

The report dismissed the much touted creation of the Russian equivalent of BHP Billiton from six diverse companies – Norilsk Nickel, Metalloinvest, Evraz, Mechel, Uralkali and VSMPO-Avisma – as highly unlikely, given its complexity and the lack of potential synergies.

Instead, UniCredit said it saw super-mergers among two or three Russian companies as more feasible.

The report said the combination of energy giants Surgutneftegaz-Rosneft and miners Rusal-Norilsk Nickel are the most likely candidates to form new national champions. It said it believed Surgutneftegaz's $20bn cash stockpile may prove too attractive for debt-laden Rosneft to pass up this year, while the crisis may prompt the state to tighten its control of the oil sector, which remains the key to securing budget financing and political influence in Russia.

Several Russian metals billionaires, hit hard by the credit crunch, have proposed merging their firms in various schemes that would allow the state to part-own a diversified miner in exchange for absorbing most of the owners' debts.

As for Rusal and Norilsk Nickel, UniCredit believes the threat of nationalisation due to high debt levels and increasing interest from other industrial groups such as Metalloinvest might compel the owners to merge the assets later this year.

The bank said the potential mergers of Sistema's fixed line and mobile subsidiaries MTS and Comstar, along with steel-maker Mechel and coalminer Belon, are the most reaslistic due to their simpler structure and operational synergies.

The financial strain on Sibir Energy's key shareholders raises the chances of an alliance with an oil major. UniCredit regards Gazprom Neft as the primary candidate.

Russia’s market freeze takes country closer to Bric exit

Financial News

Jason Corcoran in Moscow

16 February 2009

Falling trading volumes and low liquidity are forcing managers to desert

Temperatures as low as minus five degrees Celsius last week gave fund managers a ready-made excuse for turning their backs on Moscow and finding somewhere warmer. But Russia’s rapidly freezing stock markets had rather more to do with the decision of James Fenkner, founder and managing partner of Red Star Asset Management, to move his fund’s operation to Los Angeles this month. Illiquidity has become the order of the day in Moscow-quoted equities.

Jim O’Neill, head of global economic research at Goldman Sachs, raised the possibility last month that Russia could be dropped from the Bric grouping, only to dismiss it.

Fenkner cited family reasons as his main motivation to relocate, and the fact that his seed investor, Austria’s Erste Bank, pulled its mandate, but he also depicted a market suffering from declining corporate disclosure and crumbling market infrastructure.

He said: “On the business side, Russia has become a pure macro play. Over the past year we have moved most of our portfolio into American and global depositary receipts due to a combination of value and liquidity and we really get active around 5:30pm when London and US open. Micex and most of the local share stories are a joke.”

The worsening economy and the slide in the price of oil has spurred investors to pull $290bn (€226bn) from the country since the end of July, according to French bank BNP Paribas.

Hedge funds and long-only vehicles focused on Russia began switching their focus to trading ADRs and GDRs in London and New York after Russia’s five-day war with Georgia in August. Damaging corporate disputes at miner Mechel and the Anglo-Russian joint petroleum venture TNK-BP shook the domestic markets and exacerbated the investor exodus.

Further market instability, fuelled by falling commodity prices and a weakening rouble, has led to 30 trading suspensions on the Micex stock exchange. Micex has shed 50% of its value, while its dollar-denominated rival RTS has fallen by 75% from its highs last year. The Russian RTS index was the worst performer last year after Ukraine and Iceland and came close to equalling the 85% drop experienced during Russia’s sovereign default in 1998.

Daily trading volumes in Moscow dropped off sharply from $7bn early last year to $2bn by the end of the year, which is on a par with trading volumes of 2003.

O’Neill, who popularised the term Bric as a moniker for Brazil, Russia, India and China, raised concerns about Russia’s over-reliance on oil and its poor corporate governance. Its share index has fallen far behind that of Brazil, the other net exporter of natural resources of the four.

Russian public companies are trading at the price/earnings ratio of three, whereas the ratio in January last year was 11. The average p/e ratio of emerging markets was nine and developed markets was 12 at the end of last year.

One of the results of the fall has been to drive trading back to London. Before the meltdown, analysts at Renaissance Capital estimated Moscow had 70% of equity trading volumes against London’s 30%. Renaissance said the ratio last month was 50%-50%.

Alexander Kotchoubey, head of international development for Russia and eastern Europe at Swiss private bank Lombard Odier Darier Hentsch, said the preference for GDRs and ADRs reflected the realisation that the Russian market possesses little depth or companies that offer diversification. He said: “You have to wonder why one needs to take the risks associated with local markets’ liquidity and closures when similar returns can be had through GDRs and ADRs but with a lot less hassle.”

Hedge funds operating throughout Russia and the Commonwealth of Independent States are cutting their staff and slashing costs in response to market falls and increases in client redemptions.

The closure last year of the 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.

Da Vinci Capital Management’s special opportunities fund, which invested in Russian equities, has bee restructured because of too little assets.

Other funds, including Denholm Hall Russian Arbitrage fund have announced they are considering a restructuring following difficulties.

East Capital Asset Management, which maintains a large investment team in Moscow, has been forced to begin trading more in London because of trading problems. The Swedish firm, which has about $1.5bn invested in Russia and eastern Europe, has cut 40 jobs from its base in Stockholm and from other centres such as Moscow. Peter Elam Hakansson, founder of East Capital, listed falling oil prices, a weakening rouble, corporate governance and financial market regulations as four reasons for Russia’s cheapness.

In a letter to investors, Hakansson wrote: “It is difficult for Russia to influence the first two factors, but the remaining two are even more important for the country to focus on. Corporate governance is once again in the spotlight, after the autumn saw some dubious interpretations of what is right or wrong according to Russian legislation.

“And lastly, financial market regulations have been making the news after the markets on occasions were shut down in such a way as to baffle observers and appear over-dramatic.”

Russia falls away from Brazil

Troika returns to Russia after Cohen exit

Financial News

Jason Corcoran in Moscow

16 February 2009

Russian investment bank Troika Dialog has moved the management of its hedge fund business from London to Moscow following the departure of its chief executive Stephen Cohen last year.

A Troika spokeswoman said the fund was now being run by an investment committee and its two portfolio managers are Oleg Larichev and Vladimir Potapov.

Larichev is chief investment officer at the bank’s fund management subsidiary Troika Dialog Asset Management and Potapov, who joined the group in 2003 as an intern, has been a fund manager for several years.

Cohen joined Troika as head of its hedge fund business in 2006 after being made redundant as head of European business at Putnam Investments. He quit Troika in August last year, re-emerging at UK fund manager Montanaro in October as a director with responsibility for business development.

Of his departure from Troika, Cohen said: “They had wanted me to relocate to Moscow, but I could not for various personal reasons. I was trying to build an international product so Russians could invest outside of Russia but there was little demand. The product was no longer valid so it was logical to move the business to Moscow.”

Cohen said the Cayman Islands-registered Troika Russian fund had once totalled $200m but had been “whacked for performance” over the past six months.

Troika said Cohen’s departure had pre-dated the financial crisis in Russia but declined to comment on the circumstances. A number of Russian hedge funds have closed recently or “gated” investors’ ability to withdraw funds during a 75% decline in the stock market and a deteriorating investment climate for minority shareholders.

Monday, 16 February 2009

Vladimir Putin: be Björn Again

The Guardian - Comment is free

The Russian PM should embrace his Abba-loving side – in a global downturn, his country needs all the kitsch it can handle
Comments (67)

By Jason Corcoran

Claims that Vladimir Putin is a secret Dancing Queen are causing a sensation in Moscow.

The prime minister's press office has denied that the judo-loving, tiger-hunting all-action hero is a closet Abba fan, following a private concert given by the tribute band Björn Again. Putin's personal spokesman Dmitry Peskov also took the unusual step of writing to the Times to reiterate the point.

But the Kremlin has been far too hasty in trying to suppress this story. Russians would warmly embrace their leader's softer musical side in a crucial year, as the capital prepares to host the ultimate celebration of kitsch for the very first time.

Russia and the Slavic nations take Eurovision very seriously and are tremendously proud of Dima Bilan's achievement in winning last year in Belgrade.

Bilan, a heartthrob throughout Russia and the Commonwealth of Independent States (CIS), won following an audacious performance that was accompanied by Olympic figure-skating champion Eugeni Pluschenko who skated during the performance, and violinist Edvin Marton playing a rare 1697 Stradivarius, once used by Paganini.

Sporting and cultural achievements, much more than peak oil prices and military incursions, have restored Russians' pride in their country.

The unprecedented outpouring in June last year of an estimated 700,000 football fans onto the streets of Moscow, following Russia's trouncing of the Netherlands indicates how much they care about national triumph through sport.

Russians deeply appreciate classical and popular music in its different forms. Glamour and showbiz are exalted and Moscovites will embrace Eurovision for all its tackiness and absurdity.

With global prices of oil, Russia's chief export, now dropping, there's less money swishing about to lavish on recreation and sport.

Uefa Cup champions Zenit St Petersburg, sponsored by energy giant Gazprom, recently sold Russia's star Andrei Arshavin to London's Arsenal.

Other domestic clubs are feeling the pinch with Moscow's Khimki having to merge with FC Saturn to save costs. The national football team's manager, Guus Hiddink, was this week been hired as the Chelsea's latest manager, following reports he hasn't been paid by Russia for two months.

Staples of Moscow's cultural life such as attending the ballet, the theatre or musical performances are becoming more inaccessible, with inflation remaining defiantly high and job losses spreading across the economy.

By May, social morale in the country might need a shot-in-the-arm.

The UK has the theatrical impresario and composer Andrew Lloyd Webber as its main cheerleader and Russia needs its own Super Trouper so it can retain its crown in May.

Putin's protege, President Dmitry Medvedev, has made no secret of his affinity for British heavy rockers Black Sabbath and Deep Purple. Medvedev publicly attended the latter's concert last year and posed for thumbs-up photos with the band afterwards.

Putin, a former KGB officer, might be best advised to shed his macho image and show a fluffier, feathered-boad element to his steely facade. If the Russian rouble carries on sliding and commodity prices continue to languish, Putin could be forgiven for sending out a SOS.

The Eurovision in May could prove to be the Russian premier's Waterloo if discontent about the economy dents his undeniable popularity. Mamma Mia, I think Putin should unleash his inner Abba.

Wednesday, 11 February 2009

A tough market for vice --- In current recession, gambling, booze, sex aren't doing so well

Wall Street Journal

By Jason Corcoran of Financial News

Vice has historically been a virtue in turbulent investment times, but the current recession might stretch the patience even of the Devil.

In previous downturns, tobacco, gambling and alcohol could almost always be relied on to beat the index. Analysis released in November by Merrill Lynch shows that, during the six recessions since 1970, alcohol, tobacco and casino stocks have, on average, returned 11%, compared with a 1.5% loss for the S&P 500.

However, this recession appears to be different with booze, cigarettes and gaming wobbling as never before.

Socially responsible funds and ethical investments, on the other side of the spectrum, seem to be holding their own.

Penny Shepherd, chief executive of Uksif, a 200-member responsible investment forum, said: “In the last recession in the early 1990s the green and ethical issues disappeared off the agenda pretty quickly.

“Today, climate change and the need to recycle are underlying issues that aren’t going away.”

Shepherd points to the performance of the Ecclesiastical Amity International fund, which tops Citywire’s universe of 160 global growth funds over three years. The fund has produced a return of 24% against a sector average of minus 11%.

However, a study in December by French business school Edhec of 62 SRI funds found no evidence that socially responsible funds produce outperformance.

The results showed that none of the funds produced positive and significant outperformance of the market over a six-year period. Most of the funds generated negative or insignificant outperformance.

Hugh Wheelan, editor of online magazine Responsible Investor, said measuring the performance of SRI funds is problematic because of the variety of funds and the fact many do not screen stocks such as alcohol and gambling.

He said: “Responsible investment or sustainable investment is such a broad church now, including the integration of environmental, social and governance research into investment, best-in-class strategies and new areas such as human capital, governance, activism or clean tech/renewables, that its singular association with sin stocks and the old vice/performance debate is old hat and somewhat meaningless.”

Clearly, investors have different requirements which can affect performance.

Steve Waygood, head of research and engagement at Aviva Investors, said SRI funds within the same group could have different criteria on vice. He said: “The Norwich Union SRI fund would ban alcohol, but the sustainable fund has a different view.”

Jane Goodland, investment consultant at Watson Wyatt, believes a high level of negative screening can hamper performance.

She said: “Funds with extensive negative screening are not well positioned to respond to changing markets. More opportunistic sustainable investment funds that we favor tend to be more adaptable.”

While a little vice can go a long way to improving performance, the overall appetite for sinful stocks appears to be flagging.

A much-anticipated $460m (€358m) initial public offering on the New York Stock Exchange by the publisher of top-shelf Penthouse magazine is rumored to have been delayed by big investors demurring.

Parent company FriendFinder Networks registered with the US Securities and Exchange Commission for a listing of up to $460m on December 23. A spokesman for its sole underwriter Renaissance Capital declined to comment, but a US banker said the sleazy nature of some of the company’s operations made it a tough sell. He said: “These offerings are off limits for most mainstream investors, but the nature of some of these sites is putting off even the hardcore vice investor.”

Hard times have also hit the listed Australian brothel and lap-dancing group Planet Platinum, which last week appealed to its government for fiscal support.

Planet Platinum’s chief executive, John Trimble, said: “We’re an essential service, you know.” He argued in the Australian press that taxpayers should help fund the adult services sector just as it helps ambulance and fire-fighting services. The group’s share price remained flat at 11 cents over the past five months, a fraction of its listing price of $2.05 in May 2003.

In the US, the chief executive of adult entertainment group Girls Gone Wild, Joe Francis, and Hustler magazine founder Larry Flynt appealed to Congress to provide a $5bn aid package to the sector. Francis said: “Just to see us through hard times.”

Charles Norton, portfolio manager of USA Mutuals’ Vice Fund, believes the credit crisis is swamping previously recession-resistant sectors.

He said: “These sectors have historically acted as a sort of investment levee that could withstand most storms, but starting in the summer of 2007, an economic hurricane developed that drowned all corners of the equity market.”

The Vice Fund, set up in 2002 to invest in companies with a compelling gambling, alcohol, arms or sex business, has been having a tough time lately. Previously a top-decile performer, its value has dipped by 42% over the past 12 months, only narrowly beating the S&P 500’s decline of 45%.

Norton said recent share price movements have been driven by macro factors and bear little relation to companies’ fundamentals. Over a longer term, he believes vice stocks remain strong and will rebound more quickly.

He said: “International tobacco is a classic example. Consumers around the world have continued to enjoy cigarettes – even in this global economic crisis – and have even been trading up to higher priced international brands.” The fund’s top two picks are cigarette manufactures Lorillard and Philip Morris. The two stocks have fallen by about 20% and 25% respectively over the past 12 months.

While investment banks have been quietly cutting their ethical investment research teams, the buyside are retaining staff and investors appear to be rewarding them. At the peak of the banking crisis in November, outflows from European managed funds reached €154bn, or 0.11% of total funds.

By contrast, outflows from green funds totalled €835m or 0.05% of total funds, and SRI funds lost €496m, or just 0.01% of their total.

It remains to be seen whether investors will stick to their ideals in a prolonged downturn. Will they be spooked into dumping their principles in favour of the old reliables if markets get tougher?

Penny Shepherd of Uksif said ethical purchasing of Fairtrade products was holding up despite belt-tightening. A survey last week by grocery researcher IGD showed the number of people buying Fairtrade products rose 23% last year from the year before and almost three times more than in 2006.

Shepherd said: “There is an underlying shift in values taking place. A whole range of people are concerned about being responsible and expecting companies they invest in to be so too.”

(Copyright (c) 2009, Dow Jones & Company, Inc.)
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Tuesday, 10 February 2009

Red Star Founder Quits Russia After 14 Year

Dow Jones International News

By Jason Corcoran in Moscow

9 February 2009

One of the best-known Russian strategists is quitting the country after the backer of his Moscow-based hedge fund, Red Star Asset Management, pulled its mandate amid plummeting markets.

James Fenkner, founder and managing director of Red Star, is moving to Santa Barbara, California after working in Russia for 14 years. Fenkner took the decision after Erste Bank, an Austrian retail bank with a network across central and eastern Europe, withdrew its support for Red Star.

Erste did not respond to calls seeking comment. Fenkner said his relocation was mainly for family reasons. He said: "We believe that great fortunes will again be made in Russian shares, but one doesn't need necessarily to live 24/7 in Moscow to participate...Like most investors, I want to fly in for a few weeks a year with a better global perspective."

Fenkner set up Red Star in 2005 after seven years at Russian investment bank Troika Dialog as head of research and initially as chief strategist.

His departure from Russia follows the closure of several hedge funds operating in the region and a deteriorating investment climate for minority shareholders.

Many Russian funds, including Red Star, have switched in recent months to trading American and global depository receipts in London and New York because of domestic illiquidity and frequent market closures in Moscow.

Erste had represented 40% of the fund, which had stood at $150 million in assets under management last year. Redemptions by clients and a collapse in equity valuations have sliced the fund size to $12 million.

RBS hires ex-Renaissance buyout boss

Financial News Online

Jason Corcoran in Moscow

February 3 2009

Rory Cullinan, former deputy chairman of private equity at Renaissance Partners, has rejoined Royal Bank of Scotland a month after leaving the Russian buyout group.

Cullinan spent 16 months at Renaissance after joining from buyout firm Permira in August 2008. Prior to that he led RBS' equity finance division and sat on the board for corporate banking and financial markets from 2001 to 2005.

An RBS spokesman said Cullinan had joined the wholesale global banking and markets division and would work on projects where his expertise will add value.

During his prior tenure at RBS, Cullinan was responsible for a portfolio of more than 100 companies. He also presided over a deal that saw RBS buy a controlling stake in Southern Water at a cost of £273m (€302m), becoming a director of Southern Water Capital.

Before joining RBS, Cullinan spent eight years in banking in South Africa, Europe and the US, mainly with Citibank. In 1992 he co-founded Verdoso, a private investment fund, which owned The Sellotape Company, remaining a partner until 2000.

Financial News yesterday reported Cullinan and Richard Olphert, the chairman of Renaissance Partners, had both left the firm, which is part of the Renaissance banking group.

A Moscow spokesman for Renaissance said the private equity team had been pared back to eight from a staff of 12.

Renaissance Partners, which raised a $600m (€467m) fund last year, realised substantial losses through investments in Ukraine and Africa, according to Russian business paper Vedemosti.

Renaissance Capital parts with private equity pair

Financial News

February 2 2009

Jason Corcoran in Moscow

Renaissance Capital has parted company with two executives, Richard Olphert and Rory Cullinan, in a second round of job cuts at the Russian emerging markets investment bank, according to people with knowledge of the situation.

The Moscow-headquartered bank, run by New Zealander Stephen Jennings, has been cutting costs and retreating to its core Russian market following the sale of a 50% stake in the business last year to billionaire Mikhail Prokhorov.

A Renaissance spokesman declined to comment on the departure of Olphert, chairman of Renaissance’s private equity arm and a leading shareholder. The bank confirmed Cullinan, hired as deputy chairman of Renaissance Partners from private equity firm Permira Partners in August 2007, had left before the start of this year and the private equity team had been pared back to eight from a staff of 12.

Another casualty is global head of communications Simon Moyse, a former adviser to British Prime Minister Gordon Brown hired from UK-based press relations agency Finsbury in September last year.

After cutting a quarter of its 1,500 staff in November, Renaissance Capital insiders said a second round of redundancies is under way. RenCap’s London office, which once had 150 employees, has been reduced to a few dozen staff.

The departure of Olphert, a close ally of Jennings, surprised one Renaissance Capital banker, who said: “Richard was the second largest shareholder after Stephen. They lived close to one another, they went on holiday together on Stephen’s Gulfstream jet.”

Renaissance Partners, the private equity firm which raised a $600m fund last year, realised substantial losses through investments in Ukraine and Africa, according to Russian business paper Vedemosti. A Renaissance spokesman declined to comment on the reported losses.