Wall Street Journal and Financial News
By Jason Corcoran
15 December 2008
Fund managers have called the bottom too often
The investment horizon has experienced so many false dawns over the past 18 months that investors could be forgiven for regarding any rose-tinted outlook as a mirage.
Every time the stock market suffers another steep drop, fund managers and investment sages pronounce that the market bottom is in sight and now is the time to buy.
Fundamentals, technical signs and precedents may have backed up some of their theories but subsequent slumps in valuations have not borne out their views.
Ken Kinsey-Quick, head of multi-manager strategies at UK asset manager Thames River Capital, said: “The problem with predictions is that no one has a perfect crystal ball. Anyone making a prediction is taking a risk which gives them about a 30% chance of being right and looking like a superstar.”
Many potential superstars, however, have looked like chumps because their “unprecedented buying opportunities” have been so wide of the mark. Over the past year, asset managers have made the case for investing in financials, consumer cyclicals such as retailers, builders, media, industrials and Asian equities.
In the spring, several hedge funds and long-only investors jumped into banking debt believing it was cheap.
Funds such as Thames River Capital, Centaurus Capital and Union Bancaire Privée began buying leveraged loans and asset-backed securities that had been languishing on banks’ balance sheets since the credit crisis began in the summer of 2007. Kinsey-Quick said: “We bought into bank debt and got caught by the falling knife.
It looked cheap and the fundamentals were good but it’s even cheaper now because liquidity has dried up over the past three months since Lehman Brothers went bust. We lost about 4% on the investment this year. One advantage of experience is not to double down.”
London-based hedge fund Centaurus Capital started buying banking loans in April. A source close to the firm said it had not lost money on its investment until September when Lehman’s bankruptcy triggered a market meltdown.
The source said: “Everyone was thinking [in spring] that the worst was over when Bear Stearns nearly went under and that the banks would not be allowed to go under. I remember people saying you need to be long in debt financials but a succession of things happened after that you couldn’t legislate for.”
Centaurus, which had a restructuring plan for its flagship $1.2bn Alpha fund rejected last week, said credit was never more than 50% of its multi-strategy fund and usually between 20% and 30%.
Eric Debonnet, deputy chief investment officer at French fund of hedge funds HDF Finance, said he never believed the story about buying cheap debt. He said: “Our view then and now is that it’s too early because we still need many more bankruptcies before we reach distressed. The right time is when we are getting close to the highest default rate. S&P is forecasting 7% to 10% and today we are only at 1% to 2% depending on the country.”
Some asset managers have stressed that they have been investing in banks because of their long-term value. This was the reasoning expressed in June by Bill Gross, chief investment officer at Pimco, when he said he remained invested in the corporate debt of big investment banks, including Citigroup, Morgan Stanley and Goldman Sachs, holdings that have since fallen in value.
UK fund managers have been similarly burnt in the short term by the collapse of the banking industry. Listed manager Schroders held UK bank Lloyds TSB at the start of the year and bought into HBOS in the summer and more recently, Royal Bank of Scotland.
Nick Purves, Schroders UK value fund manager, said: “We accepted the outlook was bleak but the share prices were very low at the time. Banks are by their nature very risky but we feel they now have enough capital to survive and are worth investing in over the long term.”
Schroders believes the current valuations of UK banks and equities represent good long-term buys and it points to the dividend yield of stocks rising above the yield on 10-year bonds.
In the US, the dividend yield on the Standard & Poor’s 500-stock index is about the same as the yield on 10-year Treasury notes, about 3.5%, the first time such convergence has happened in about 50 years. In the UK, the FTSE 100 is trading on a price-earnings ratio of about 7.5 times, a figure that puts it in the lowest 20% of valuations for the FTSE since 1965.
Ian Lance, Schroders UK equity specialist manager, said capitalising on such valuations had historically generated returns of about 20%.
He said: “Over the past six months, the dividend yield on the highest yielding UK stocks has risen to its highest point in over 20 years – even if you exclude financials. The dividend yield on non-financial stocks now exceeds the yield on 10-year gilts.”
However, this correlation between equity and bond yields could be a false dawn as companies may be forced to slash dividends to conserve cash, making the sustainability of such payments impossible in a deep downturn.
Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania, claimed stocks had reached a “selling climax” on July 15, which he believed would be seen as the bottom for the market.
In September, Goldman Sachs’ chief US portfolio strategist David Kostin called the bottom for equity markets and forecast a 12% upside on the S&P 500 by year-end.
Anthony Bolton, who managed the £2.4bn Fidelity Special Situations fund for 28 years, said in October he was buying shares for the first time in two years because some valuations were the cheapest he had seen in a lifetime.
Jeremy Grantham, founder of investment management firm GMO and a long-term bear, said in October that stocks were then more attractively priced than at any time since 1987. He said: “If we look at values like this and fail to buy them, we will subsequently not only look like fools, we will be fools.”
Investor Warren Buffett also said in October he had begun to buy stocks although with the caveat that he was not predicting that the worst of the sell-off was over.
A sustained upturn has yet to materialise. Robin Griffiths, technical strategist at Cazenove Capital Management, has pinpointed times and dates when investors should enter and leave the market.
In August, Griffiths said October 14 at 3.30pm was the right time to invest because indices would rise by between 25% and 30%.
Griffiths, who predicts market movements after studying historical graphs, trends and data, told Financial News last week that his basic story remained intact. He said: “Our timing schedules are generally quite good but we have had monstrous volatility which has ruined the trend.”
Griffiths said historic data for dividend yields and price earnings ratios showed that current bargains had been equalled only in October 1987, October 1974 and in 1930. He said: “We have to accept the conditions that produce these bargains are really scary, and we need to steel ourselves to copy Buffett, and be greedy when others are in fear.”
Griffiths predicts the market will rally following Barack Obama’s inauguration as US President on January 25, but will run out of steam by May.
Showing posts with label fund management. Show all posts
Showing posts with label fund management. Show all posts
Wednesday, 17 December 2008
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.
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.
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.
http://www.wealth-bulletin.com
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.
http://www.wealth-bulletin.com
Wednesday, 30 July 2008
Foreign managers attracted to Russia by the region’s wealth
Financial News
Jason Corcoran in Moscow
28 Jul 2008
Russia’s crowded asset management arena is getting busier. France’s Société Générale Asset Management is the latest foreign investment business to explore launching funds there, as firms are attracted by the wealth being generated within the country.
Benelux’s Fortis, Germany’s Allianz, Italy’s Pioneer Investments, Austria’s Raiffeisen, Germany’s DWS, Iceland’s Glitnir and Baltic manager Parex have all launched Russia-domiciled funds in the past few years.
Russia’s emerging middle class and a boom in commodity prices have led to annual growth in retail asset management of 50% a year.
Société Générale Asset Management, which manages more than £262bn (€332.7bn) worldwide, may be about to join the fray by setting up a retail operation in Moscow, according to sources. It is believed to have applied to the main regulator, the Federal Financial Markets Service, for an asset management license.
Société Générale declined to comment on whether it was poised to enter the Russian fund market. A Paris spokeswoman said: “SGAM continues to study the various opportunities to intervene on the Russian market.”
The French group has distribution in Russia through its control of retail bank Rosbank, which has a network in most of the country’s regions.
However, domestic fund managers such as Troika Dialog Asset Management, which manages more than $10bn (€6.4bn) in retail, institutional and government funds, are sceptical of the chances of foreign participants succeeding. Pavel Teplukhin, chief executive of Troika Dialog Asset Management, said: “I assume that all of the global players will be in Russia pretty soon. Quite a number of global asset managers already operate in Russia and their success is rather mixed.”
Troika is Russia’s market leader in the management of retail funds, known as personal investment funds or PIFs. Teplukhin, who helped draft the Russian Federal Law on mutual funds, believes a lack of brand recognition is the greatest hurdle for foreign fund firms.
He added: “Their names are not familiar to the Russian audience and it is hard for the management of these banks to understand that. It would take a while before they can provide potential clients with a clear Russian record and before they win some brand recognition. Current market sentiments are not helpful either.”
One way for foreign funds to overcome the brand issue is to partner with a local institution.
Benelux’s Fortis and Germany’s Allianz have gone down this route with their tie-ups with St Petersburg-based investment bank KIT, and Rosno, which has a successful insurance business.
KIT Fortis, the fund management joint venture, has grown rapidly in assets under management to 60bn roubles (€1.6bn) since its launch in May last year. KIT Fortis has distribution agreements with more than 60 agents, such as VTB 24 and Citibank, in 650 outlets across Russia.
The growth in assets was helped by the transfer to the company of €640m ($1bn) from existing Fortis international funds and segregated accounts in the Nordic region. The assets were transferred under the terms of the acquisition of Fortis Investments of Dutch fund manager ABN Amro Asset Management.
Vladimir Kirillov, chief executive of KIT Fortis Investments, said the transfer of funds from ABN Amro was based on the success of its first Russia-domiciled equity fund. He said: “The fact that a large institutional client deposited €150m in the funds after the decision to transfer them to our company speaks for itself.”
Joint venture Allianz Rosno Asset Management, which has benefited from the expertise of the German group’s Allianz Global Investors, has grown to assets under management of about $700m.
It was one of five managers awarded 1.5bn roubles by the Russia Venture Company, which was set up by the Government to revitalise Russia’s industrial base.
Pioneer Investments, the funds subsidiary of Italy’s UniCredit, has set up a Moscow operation and hired local managers to run its domestic fund range. Austria’s Raiffeisen Capital Management, which manages €40bn, is one of the few foreign participants with brand recognition through its Russian retail banking network and its acquisition last year of Impexbank, Russia’s seventh largest bank.
Raiffeisen, which has been investing in Russia since 1994, has a local fund management subsidiary staffed by three fund managers and two analysts. Through Raiffeisen Capital Moscow, Russians are being offered locally domiciled bond and equity funds.
wwww.efinancialnews.com
Jason Corcoran in Moscow
28 Jul 2008
Russia’s crowded asset management arena is getting busier. France’s Société Générale Asset Management is the latest foreign investment business to explore launching funds there, as firms are attracted by the wealth being generated within the country.
Benelux’s Fortis, Germany’s Allianz, Italy’s Pioneer Investments, Austria’s Raiffeisen, Germany’s DWS, Iceland’s Glitnir and Baltic manager Parex have all launched Russia-domiciled funds in the past few years.
Russia’s emerging middle class and a boom in commodity prices have led to annual growth in retail asset management of 50% a year.
Société Générale Asset Management, which manages more than £262bn (€332.7bn) worldwide, may be about to join the fray by setting up a retail operation in Moscow, according to sources. It is believed to have applied to the main regulator, the Federal Financial Markets Service, for an asset management license.
Société Générale declined to comment on whether it was poised to enter the Russian fund market. A Paris spokeswoman said: “SGAM continues to study the various opportunities to intervene on the Russian market.”
The French group has distribution in Russia through its control of retail bank Rosbank, which has a network in most of the country’s regions.
However, domestic fund managers such as Troika Dialog Asset Management, which manages more than $10bn (€6.4bn) in retail, institutional and government funds, are sceptical of the chances of foreign participants succeeding. Pavel Teplukhin, chief executive of Troika Dialog Asset Management, said: “I assume that all of the global players will be in Russia pretty soon. Quite a number of global asset managers already operate in Russia and their success is rather mixed.”
Troika is Russia’s market leader in the management of retail funds, known as personal investment funds or PIFs. Teplukhin, who helped draft the Russian Federal Law on mutual funds, believes a lack of brand recognition is the greatest hurdle for foreign fund firms.
He added: “Their names are not familiar to the Russian audience and it is hard for the management of these banks to understand that. It would take a while before they can provide potential clients with a clear Russian record and before they win some brand recognition. Current market sentiments are not helpful either.”
One way for foreign funds to overcome the brand issue is to partner with a local institution.
Benelux’s Fortis and Germany’s Allianz have gone down this route with their tie-ups with St Petersburg-based investment bank KIT, and Rosno, which has a successful insurance business.
KIT Fortis, the fund management joint venture, has grown rapidly in assets under management to 60bn roubles (€1.6bn) since its launch in May last year. KIT Fortis has distribution agreements with more than 60 agents, such as VTB 24 and Citibank, in 650 outlets across Russia.
The growth in assets was helped by the transfer to the company of €640m ($1bn) from existing Fortis international funds and segregated accounts in the Nordic region. The assets were transferred under the terms of the acquisition of Fortis Investments of Dutch fund manager ABN Amro Asset Management.
Vladimir Kirillov, chief executive of KIT Fortis Investments, said the transfer of funds from ABN Amro was based on the success of its first Russia-domiciled equity fund. He said: “The fact that a large institutional client deposited €150m in the funds after the decision to transfer them to our company speaks for itself.”
Joint venture Allianz Rosno Asset Management, which has benefited from the expertise of the German group’s Allianz Global Investors, has grown to assets under management of about $700m.
It was one of five managers awarded 1.5bn roubles by the Russia Venture Company, which was set up by the Government to revitalise Russia’s industrial base.
Pioneer Investments, the funds subsidiary of Italy’s UniCredit, has set up a Moscow operation and hired local managers to run its domestic fund range. Austria’s Raiffeisen Capital Management, which manages €40bn, is one of the few foreign participants with brand recognition through its Russian retail banking network and its acquisition last year of Impexbank, Russia’s seventh largest bank.
Raiffeisen, which has been investing in Russia since 1994, has a local fund management subsidiary staffed by three fund managers and two analysts. Through Raiffeisen Capital Moscow, Russians are being offered locally domiciled bond and equity funds.
wwww.efinancialnews.com
Monday, 3 March 2008
Polar switches its focus from Moscow to Ukraine
Financial News
Jason Corcoran in Kiev
03 March 2008
The decision by UK investment group Polar Capital to relocate its east European operations from Moscow to Kiev comes amid rising interest among international investors in Ukraine’s economy.
Polar, which runs traditional funds and hedge funds, said the move was prompted by a lack of opportunities in Russia and the growing importance of Ukraine.
Investors are lured to Kiev by attractive valuations and improvements in corporate standards, despite its low liquidity and lack of transparency.
Anton Khmelnitski, a director of Polar, said: “Russia is entering a period of sub-par returns compared with historical margins, and some of the value has disappeared. Ukraine is insulated from the credit fallout and its stock market has been a star performer in global equities. The main index was up 135% last year, which was only bettered by China.”
Investors believe Ukraine will grow following its admittance last month to the World Trade Organisation and the announcement of its co-hosting the 2012 European football championships with Poland.
Polar will shortly launch a Ukrainian fund to invest $500m (€332m) in public and private companies at early stages and those launching initial public offerings. It plans to hire four analysts in addition to the two fund managers transferring from Moscow.
The manager has taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon-Ukrainian Properties & Development. The group has also made money for its investors through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kiev operation will primarily focus on property, domestic food, pharmaceuticals, high-technology companies and insurance businesses.
Khmelnitski said: “The property market is at the beginning of its cycle and there are a lot of obvious opportunities in food, consumer goods and the beverage market. Accession to the WTO is a milestone event and will be key to this economy.”
Polar cut the Russian exposure of its $220m Elbrus fund from 70% to 15% six months ago and has sold its holdings in blue chips, including Russia’s electricity monopoly UES and Golden Telecom.
Khmelnitski believes Ukraine will outpace Russia or any other market in a bull market or even during a global slowdown because it is “cut off from the international capital markets”.
Russian bank Troika Dialog has also set up an office in Kiev, where it has secured an asset management licence.
Stephen Cohen, chief executive of Troika’s hedge fund business, said: “We are managing money for a Ukrainian pension fund and looking at different opportunities. The political climate is friendly for doing deals and people want to believe the story. If it’s this good without any government, how good
can it be?”
Ukraine’s legislative programme is at a virtual halt under President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, who are in a coalition for the second time after elections last autumn.
But Troika’s hedge fund has zero exposure to Ukraine and Cohen believes Russia is a better play.
The Ukraine’s main stock exchange, the PFTS, has fallen 5.9% since the start of the year, compared with Russia’s RTS index, which is off by 9.1% – Cohen believes Moscow is undervalued.
Moreover, turnover on Kiev’s stock market is just $28m a day, compared with about $6bn on Moscow’s. Cohen said: “Liquidity is difficult. If you start talking about an investment, you prevent yourself from executing.”
Tom Adshead, head of research at Sito Capital, an emerging markets hedge fund manager with offices in Kiev, said: “It is a very illiquid market but there is great value from buying and holding stocks benefiting from strong domestic growth.” Sito recently launched a Ukraine fund with $50m under management, which is about 40% invested in banks and 40% in steel.
Sweden’s East Capital and Baltic investor Parex Asset Management have also dedicated Ukrainian funds offering foreign investors access to the market.
US-owned, Moscow-based, Pio Global has announced plans for three mutual funds in Kiev focusing on emerging mid-cap companies. Russian commercial bank Uralsib is also establishing retail funds, a segment that is dominated by local participants.
Ukraine’s gross domestic product rose 7.3% last year, beating original targets. GDP growth this year is expected to slow down only fractionally. The value of domestic funds is not yet measurable as a percentage of Ukraine’s GDP. This compares with 5% of GDP in Russia and 10% in the US.
Alexander Pertsovsky, chief executive of Moscow-based investment bank Renaissance Capital, believes a growing boom in the number of retail investors this year will help market conditions.
Pertsovsky said at a Renaissance Capital conference last month in Kiev: “Once the boom starts in Ukraine, the mutual fund and asset management sector will grow dramatically, helping to expand domestic liquidity.”
Jason Corcoran in Kiev
03 March 2008
The decision by UK investment group Polar Capital to relocate its east European operations from Moscow to Kiev comes amid rising interest among international investors in Ukraine’s economy.
Polar, which runs traditional funds and hedge funds, said the move was prompted by a lack of opportunities in Russia and the growing importance of Ukraine.
Investors are lured to Kiev by attractive valuations and improvements in corporate standards, despite its low liquidity and lack of transparency.
Anton Khmelnitski, a director of Polar, said: “Russia is entering a period of sub-par returns compared with historical margins, and some of the value has disappeared. Ukraine is insulated from the credit fallout and its stock market has been a star performer in global equities. The main index was up 135% last year, which was only bettered by China.”
Investors believe Ukraine will grow following its admittance last month to the World Trade Organisation and the announcement of its co-hosting the 2012 European football championships with Poland.
Polar will shortly launch a Ukrainian fund to invest $500m (€332m) in public and private companies at early stages and those launching initial public offerings. It plans to hire four analysts in addition to the two fund managers transferring from Moscow.
The manager has taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon-Ukrainian Properties & Development. The group has also made money for its investors through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kiev operation will primarily focus on property, domestic food, pharmaceuticals, high-technology companies and insurance businesses.
Khmelnitski said: “The property market is at the beginning of its cycle and there are a lot of obvious opportunities in food, consumer goods and the beverage market. Accession to the WTO is a milestone event and will be key to this economy.”
Polar cut the Russian exposure of its $220m Elbrus fund from 70% to 15% six months ago and has sold its holdings in blue chips, including Russia’s electricity monopoly UES and Golden Telecom.
Khmelnitski believes Ukraine will outpace Russia or any other market in a bull market or even during a global slowdown because it is “cut off from the international capital markets”.
Russian bank Troika Dialog has also set up an office in Kiev, where it has secured an asset management licence.
Stephen Cohen, chief executive of Troika’s hedge fund business, said: “We are managing money for a Ukrainian pension fund and looking at different opportunities. The political climate is friendly for doing deals and people want to believe the story. If it’s this good without any government, how good
can it be?”
Ukraine’s legislative programme is at a virtual halt under President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, who are in a coalition for the second time after elections last autumn.
But Troika’s hedge fund has zero exposure to Ukraine and Cohen believes Russia is a better play.
The Ukraine’s main stock exchange, the PFTS, has fallen 5.9% since the start of the year, compared with Russia’s RTS index, which is off by 9.1% – Cohen believes Moscow is undervalued.
Moreover, turnover on Kiev’s stock market is just $28m a day, compared with about $6bn on Moscow’s. Cohen said: “Liquidity is difficult. If you start talking about an investment, you prevent yourself from executing.”
Tom Adshead, head of research at Sito Capital, an emerging markets hedge fund manager with offices in Kiev, said: “It is a very illiquid market but there is great value from buying and holding stocks benefiting from strong domestic growth.” Sito recently launched a Ukraine fund with $50m under management, which is about 40% invested in banks and 40% in steel.
Sweden’s East Capital and Baltic investor Parex Asset Management have also dedicated Ukrainian funds offering foreign investors access to the market.
US-owned, Moscow-based, Pio Global has announced plans for three mutual funds in Kiev focusing on emerging mid-cap companies. Russian commercial bank Uralsib is also establishing retail funds, a segment that is dominated by local participants.
Ukraine’s gross domestic product rose 7.3% last year, beating original targets. GDP growth this year is expected to slow down only fractionally. The value of domestic funds is not yet measurable as a percentage of Ukraine’s GDP. This compares with 5% of GDP in Russia and 10% in the US.
Alexander Pertsovsky, chief executive of Moscow-based investment bank Renaissance Capital, believes a growing boom in the number of retail investors this year will help market conditions.
Pertsovsky said at a Renaissance Capital conference last month in Kiev: “Once the boom starts in Ukraine, the mutual fund and asset management sector will grow dramatically, helping to expand domestic liquidity.”
Friday, 3 August 2007
Pioneer sets up shop in Moscow
Financial News
Jason Corcoran in Moscow
03 August 2007
Pioneer Investments, the funds arm of Italian bank UniCredit, is setting up an asset management operation in Moscow after failing to buy domestic player PioGlobal.
Pioneer, which has more than $326bn (€236bn) in assets, will launch four investment funds by September after being granted an asset management licence from the Federal Financial Markets Service, the Russian regulator.
The move to set up on its own follows Pioneer's failure to buy back PioGlobal Asset Management, which it established in 1995. Pioneer withdrew as a shareholder in PioGlobal following the former’s merger with Italy's UniCredit in 2000.
PioGlobal was subsequently acquired by US invsestors Harbor Global in 2000 before being sold to Russian bank CIT Finance last August for $71m. The business was sold this year to Russia's Antanta Capital for $80m so CIT could focus on its joint venture with Belgium's Fortis.
A banker close to the Harbor sale: "Pioneer made an offer to Harbor but it offered less than half than the eventual sale price."
Michael Vasileff, a business development director, is recruiting investment managers, having moved to Moscow to head Pioneer's Russian office.
One local fund executive suggested Vasileff would need to hire a minimum of 50 staff, including fund managers and back office personnel.
"They will need to spend heavily on marketing and public relations and it is much tougher to find good fund managers than bankers here. There are only four or five with any kind of record over the medium term," said the source.
A Pioneer spokesman declined to comment on its Russian plans.
UniCredit, Pioneer's Italian parent, is also making a push into retail and investment banking in Russia. Chief executive Alessandro Profumo said the group will double the number of branches belonging to its subsidiary International Moscow Bank to more than 100.
The eastern European arm of UniCredit last month completed the acquisition of Russian brokerage Aton Capital. It plans to offer underwriting and merger advice in addition to corporate lending.
www.efinancialnews.com
Jason Corcoran in Moscow
03 August 2007
Pioneer Investments, the funds arm of Italian bank UniCredit, is setting up an asset management operation in Moscow after failing to buy domestic player PioGlobal.
Pioneer, which has more than $326bn (€236bn) in assets, will launch four investment funds by September after being granted an asset management licence from the Federal Financial Markets Service, the Russian regulator.
The move to set up on its own follows Pioneer's failure to buy back PioGlobal Asset Management, which it established in 1995. Pioneer withdrew as a shareholder in PioGlobal following the former’s merger with Italy's UniCredit in 2000.
PioGlobal was subsequently acquired by US invsestors Harbor Global in 2000 before being sold to Russian bank CIT Finance last August for $71m. The business was sold this year to Russia's Antanta Capital for $80m so CIT could focus on its joint venture with Belgium's Fortis.
A banker close to the Harbor sale: "Pioneer made an offer to Harbor but it offered less than half than the eventual sale price."
Michael Vasileff, a business development director, is recruiting investment managers, having moved to Moscow to head Pioneer's Russian office.
One local fund executive suggested Vasileff would need to hire a minimum of 50 staff, including fund managers and back office personnel.
"They will need to spend heavily on marketing and public relations and it is much tougher to find good fund managers than bankers here. There are only four or five with any kind of record over the medium term," said the source.
A Pioneer spokesman declined to comment on its Russian plans.
UniCredit, Pioneer's Italian parent, is also making a push into retail and investment banking in Russia. Chief executive Alessandro Profumo said the group will double the number of branches belonging to its subsidiary International Moscow Bank to more than 100.
The eastern European arm of UniCredit last month completed the acquisition of Russian brokerage Aton Capital. It plans to offer underwriting and merger advice in addition to corporate lending.
www.efinancialnews.com
Thursday, 2 August 2007
Fortis strengthens Russian venture
Financial News
Jason Corcoran in Moscow
31 July 2007
Fortis Investments, the Belgo-Dutch asset manager, has doubled the number of staff in its Russian fund management joint venture to 90 and hired two senior investment professionals from a local rival.
The alliance with St Petersburg-based CIT Finance, completed in May, combines the companies’ interests in Russia and the Commonwealth of Independent States countries and Kazakhstan.
The venture has raided Russian rival Alfa Capital Partners for talent. Charles Tennes, former chief investment officer at Alfa, has been appointed head of equity, while Alfa portfolio manager Pavel Laberko arrives as head of research.
Tennes joined Alfa in 2003 from US hedge fund Rydex, where he oversaw $9bn (€6.6bn) in assets as portfolio director.
"Chuck Tennes is a leap forward for asset management in Russia," Alfa Capital chairman Bernard Sucher said, after hiring him.
Tennes is a commentator on financial media such as CNBC, CNNfn and Bloomberg TV.
Christian Fendt, director of the eastern Europe, Middle East and Africa regions at Fortis Investments, has moved to St Petersburg to become chief operating officer of the venture, which is headed by CIT’s Vladimir Tsuprov.
A spokeswoman for CIT Fortis said: "We have hired fund managers, middle and back office staff and we are looking for a head of sales and other sales people."
The joint venture, which has an office in Moscow, has launched a Kazakhstan subsidiary with six staff in Almaty, the Kazakh capital.
CIT Finance said assets under management had risen 44% to €910m since January.
Fortis said it wanted to tap into Russia's retail market and to offer international clients access to Russian investment opportunities.
www.efinancialnews.com
Jason Corcoran in Moscow
31 July 2007
Fortis Investments, the Belgo-Dutch asset manager, has doubled the number of staff in its Russian fund management joint venture to 90 and hired two senior investment professionals from a local rival.
The alliance with St Petersburg-based CIT Finance, completed in May, combines the companies’ interests in Russia and the Commonwealth of Independent States countries and Kazakhstan.
The venture has raided Russian rival Alfa Capital Partners for talent. Charles Tennes, former chief investment officer at Alfa, has been appointed head of equity, while Alfa portfolio manager Pavel Laberko arrives as head of research.
Tennes joined Alfa in 2003 from US hedge fund Rydex, where he oversaw $9bn (€6.6bn) in assets as portfolio director.
"Chuck Tennes is a leap forward for asset management in Russia," Alfa Capital chairman Bernard Sucher said, after hiring him.
Tennes is a commentator on financial media such as CNBC, CNNfn and Bloomberg TV.
Christian Fendt, director of the eastern Europe, Middle East and Africa regions at Fortis Investments, has moved to St Petersburg to become chief operating officer of the venture, which is headed by CIT’s Vladimir Tsuprov.
A spokeswoman for CIT Fortis said: "We have hired fund managers, middle and back office staff and we are looking for a head of sales and other sales people."
The joint venture, which has an office in Moscow, has launched a Kazakhstan subsidiary with six staff in Almaty, the Kazakh capital.
CIT Finance said assets under management had risen 44% to €910m since January.
Fortis said it wanted to tap into Russia's retail market and to offer international clients access to Russian investment opportunities.
www.efinancialnews.com
Wednesday, 27 June 2007
Russia's Renaissance expands into Middle East and Southeast Asia
Business New Europe
Jason Corcoran in Moscow
2007-06-26
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."
www.businessneweurope.eu
Jason Corcoran in Moscow
2007-06-26
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."
www.businessneweurope.eu
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