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.
Showing posts with label James Fenkner. Show all posts
Showing posts with label James Fenkner. Show all posts
Tuesday, 10 February 2009
Monday, 10 November 2008
Russian hedge funds face threat of closure
Financial News
Jason Corcoran in Moscow
10 November 2008
The closure of a Russian hedge fund run by Florin Investment Management has led to fears many more could go under as investors flee emerging markets.
It is estimated about 70 hedge funds are operating in Russia and the Commonwealth of Independent States and analysts predict over half will be wiped out by next year.
The closure 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.
Florin’s principals Neil Smith and Aidan Freyne are hoping to buy the fund’s architecture from its shareholders at Trust Capital and relaunch the fund as a distressed assets vehicle.
Smith was previously head of alternative investments at the UK’s Morley Fund Management while Freyne spent 19 years with Salomon Brothers and subsequently Citigroup.
Smith said: “Credit has been a difficult space to be in but it’s going to be great for distressed and acquiring debt at super-distressed levels.”
Fears are growing that other Russia funds with their mainly long-only bias may be wiped out like they were following the 1998 financial crisis.
Florin was set up earlier this year with $100m (€78m) in seed money from Trust Bank and other external sources.
James Fenkner, founder of Moscow hedge fund Red Star Invest, said most Russia funds were equity focused with only minimal shorting so most had been hit by the slide in stock markets.
He said: “I haven’t seen anything like this since 1998. It’s a case of survival. It’s going to be a blow-up of the good, the bad and the ugly.”
Fenkner said Red Star’s Austrian backer Erste Bank was standing behind the fund, which had bucked the trend and returned over 100% during October.
http://www.efinancialnews.com/homepage/content/3352423321
Jason Corcoran in Moscow
10 November 2008
The closure of a Russian hedge fund run by Florin Investment Management has led to fears many more could go under as investors flee emerging markets.
It is estimated about 70 hedge funds are operating in Russia and the Commonwealth of Independent States and analysts predict over half will be wiped out by next year.
The closure 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.
Florin’s principals Neil Smith and Aidan Freyne are hoping to buy the fund’s architecture from its shareholders at Trust Capital and relaunch the fund as a distressed assets vehicle.
Smith was previously head of alternative investments at the UK’s Morley Fund Management while Freyne spent 19 years with Salomon Brothers and subsequently Citigroup.
Smith said: “Credit has been a difficult space to be in but it’s going to be great for distressed and acquiring debt at super-distressed levels.”
Fears are growing that other Russia funds with their mainly long-only bias may be wiped out like they were following the 1998 financial crisis.
Florin was set up earlier this year with $100m (€78m) in seed money from Trust Bank and other external sources.
James Fenkner, founder of Moscow hedge fund Red Star Invest, said most Russia funds were equity focused with only minimal shorting so most had been hit by the slide in stock markets.
He said: “I haven’t seen anything like this since 1998. It’s a case of survival. It’s going to be a blow-up of the good, the bad and the ugly.”
Fenkner said Red Star’s Austrian backer Erste Bank was standing behind the fund, which had bucked the trend and returned over 100% during October.
http://www.efinancialnews.com/homepage/content/3352423321
Wednesday, 9 July 2008
Red Star enjoys happy third anniversary
Business New Europe
Jason Corcoran in Moscow
July 9, 2008
A detsky sad, or kindergarten, is an unlikely neighbour for a Russian hedge fund, but James Fenkner is not fazed by a little background noise.
The founder and chief investment officer of Red Star Asset Management runs a friendly and informal investment shop on an unassuming residential street situated between Moscow's boulevard and garden ring roads. Red Star's team of seven have their heads buried in work as two-dozen two-year-olds run about shrieking seven floors below. It's also a family affair - Fenkner's sister Elizabeth plays a key role as the head of marketing.
The firm was set up in 2005 after Fenkner quit Troika Dialog where he had served seven years as head of research and initially as chief strategist. "The market was just coming out of deep crisis and there were just four funds in Moscow," recalls Fenkner. "I had gotten one of the best deals from Troika because that's where I met my wife. I left because brokerages are a young's man game."
The firm launched the Red Star Double Alpha Fund, a long/short relative-value vehicle targeting equities in Russia, Eastern Europe and the former Soviet Union. Its investment objective has an absolute return target of 18% to 22%, with volatility less than that of the region's equity markets.
The fund's main backer - Erste Bank, an Austrian retail bank with a network throughout Central and Eastern Europe - came on board after Red Star's US partners pulled out. Red Star's investors are mainly institutions and the firm has a few high net-worth clients.
Happy anniversary
May marked the third anniversary of the fund, which has registered a total return of 77%. The annualised return is 21% and volatility has been 12.6%. Fenkner is keen to make a marketing push for more clients now that funds under management have reached $100m and the firm has post the all-important three-year performance numbers under its belt. May also proved to be fund's best so far, with it's net asset value up 9% due mainly to the rally in Russia's energy stocks. Most of Russia's oil majors rose by over 20% due to record high oil prices and an expectation of a cut in taxation.
Fenkner feels the upswing to Russia's oil sector could be short-lived unless the modest $5bn tax relief amount being offered by the government is increased dramatically. "For the winning streak in oils to continue, the government must play for big money rather than tokens. Discussions with a number of analysts have convinced us that the ante must be upped to $20-25bn for oil production growth to pick up materially."
Red Star's preferred bets for greater taxation relief are oil field service providers and Surgutneftegaz, which has one of the worst production growth track records. Gazprom, the world's third largest company by market cap, is the fund's biggest holding.
With the restructuring of the electricity grid UES almost complete, Red Star is betting that hydro-electricity company RusHydro will become the new proxy for the sector. "RusHydro has been a drag on performance recently, but should be the biggest beneficiary from the break-up of UES on June 6," says Fenkner. " It should be the most profitable of the utilities and it currently trades at a 40% discount to its EM hydro peers."
Fenkner, who is 42. first arrived in Moscow over 13 years ago along a circuitous route taking in the Baltics and the Czech Republic. Back in the US, he had been a fixed income analyst at US mutual fund giant Fidelity after graduating with a degree in economics from California State University, Sacramento and a masters from Tufts University. His original plan in 1993 was to come to Lithuania for a year to work as a Soros Foundation lecturer in economics at Vilnius University. "I was teaching 18- to 20-year-olds at the time and they used to tell me that the Russians had two heads and ate their own children. The level of disinformation was enormous," recalls Fenkner.
The adventure continued when he took up an offer to help set up a brokerage in Prague call Atlantik Financial Markets. Then in 1995, Fenkner came to Moscow and had stints as head of research at AIOC Capital and Robert Flemings.
Bernie Sucher, a fellow American, lured him to work as chief strategist at Troika Dialog, which Sucher had co-founded. Under his direction, Troika's research focused on corporate governance and the opportunities and risks which any change in corporate governance provides to investors. "For a brokerage to be involved in corporate governance was rare. As the environment has matured, the interests of corporate clients has become a more important component of the brokerage business," says Fenkner.
Troika took up some unpopular causes, including backing former Yukos oil tycoon Mikhail Khodorkovsky, who ended up in prison after falling foul of the Kremlin. Fenkner believes the "heady days of corporate governance" are long over with the expulsion of shareholder activist Bill Browder of Hermitage Capital and because Russian corporates have made efforts to reform and evolved to more classical valuations.
Red Star's fund employs market-based activism in its investments. If the firm doesn't like a stock and it's expensive, they tend to short it instead. The fund uses a disciplined approach to invest long in securities that they believe to be fundamentally undervalued and to short securities which they believe to be fundamentally overvalued. He currently has seven short positions, including four in Russia.
Fenkner intends to continue at helm, because it is what he likes to do. He also has his own money invested in the fund, which, he says, "helps keep the mind focused" on performance.
www.businessneweurope.eu
Jason Corcoran in Moscow
July 9, 2008
A detsky sad, or kindergarten, is an unlikely neighbour for a Russian hedge fund, but James Fenkner is not fazed by a little background noise.
The founder and chief investment officer of Red Star Asset Management runs a friendly and informal investment shop on an unassuming residential street situated between Moscow's boulevard and garden ring roads. Red Star's team of seven have their heads buried in work as two-dozen two-year-olds run about shrieking seven floors below. It's also a family affair - Fenkner's sister Elizabeth plays a key role as the head of marketing.
The firm was set up in 2005 after Fenkner quit Troika Dialog where he had served seven years as head of research and initially as chief strategist. "The market was just coming out of deep crisis and there were just four funds in Moscow," recalls Fenkner. "I had gotten one of the best deals from Troika because that's where I met my wife. I left because brokerages are a young's man game."
The firm launched the Red Star Double Alpha Fund, a long/short relative-value vehicle targeting equities in Russia, Eastern Europe and the former Soviet Union. Its investment objective has an absolute return target of 18% to 22%, with volatility less than that of the region's equity markets.
The fund's main backer - Erste Bank, an Austrian retail bank with a network throughout Central and Eastern Europe - came on board after Red Star's US partners pulled out. Red Star's investors are mainly institutions and the firm has a few high net-worth clients.
Happy anniversary
May marked the third anniversary of the fund, which has registered a total return of 77%. The annualised return is 21% and volatility has been 12.6%. Fenkner is keen to make a marketing push for more clients now that funds under management have reached $100m and the firm has post the all-important three-year performance numbers under its belt. May also proved to be fund's best so far, with it's net asset value up 9% due mainly to the rally in Russia's energy stocks. Most of Russia's oil majors rose by over 20% due to record high oil prices and an expectation of a cut in taxation.
Fenkner feels the upswing to Russia's oil sector could be short-lived unless the modest $5bn tax relief amount being offered by the government is increased dramatically. "For the winning streak in oils to continue, the government must play for big money rather than tokens. Discussions with a number of analysts have convinced us that the ante must be upped to $20-25bn for oil production growth to pick up materially."
Red Star's preferred bets for greater taxation relief are oil field service providers and Surgutneftegaz, which has one of the worst production growth track records. Gazprom, the world's third largest company by market cap, is the fund's biggest holding.
With the restructuring of the electricity grid UES almost complete, Red Star is betting that hydro-electricity company RusHydro will become the new proxy for the sector. "RusHydro has been a drag on performance recently, but should be the biggest beneficiary from the break-up of UES on June 6," says Fenkner. " It should be the most profitable of the utilities and it currently trades at a 40% discount to its EM hydro peers."
Fenkner, who is 42. first arrived in Moscow over 13 years ago along a circuitous route taking in the Baltics and the Czech Republic. Back in the US, he had been a fixed income analyst at US mutual fund giant Fidelity after graduating with a degree in economics from California State University, Sacramento and a masters from Tufts University. His original plan in 1993 was to come to Lithuania for a year to work as a Soros Foundation lecturer in economics at Vilnius University. "I was teaching 18- to 20-year-olds at the time and they used to tell me that the Russians had two heads and ate their own children. The level of disinformation was enormous," recalls Fenkner.
The adventure continued when he took up an offer to help set up a brokerage in Prague call Atlantik Financial Markets. Then in 1995, Fenkner came to Moscow and had stints as head of research at AIOC Capital and Robert Flemings.
Bernie Sucher, a fellow American, lured him to work as chief strategist at Troika Dialog, which Sucher had co-founded. Under his direction, Troika's research focused on corporate governance and the opportunities and risks which any change in corporate governance provides to investors. "For a brokerage to be involved in corporate governance was rare. As the environment has matured, the interests of corporate clients has become a more important component of the brokerage business," says Fenkner.
Troika took up some unpopular causes, including backing former Yukos oil tycoon Mikhail Khodorkovsky, who ended up in prison after falling foul of the Kremlin. Fenkner believes the "heady days of corporate governance" are long over with the expulsion of shareholder activist Bill Browder of Hermitage Capital and because Russian corporates have made efforts to reform and evolved to more classical valuations.
Red Star's fund employs market-based activism in its investments. If the firm doesn't like a stock and it's expensive, they tend to short it instead. The fund uses a disciplined approach to invest long in securities that they believe to be fundamentally undervalued and to short securities which they believe to be fundamentally overvalued. He currently has seven short positions, including four in Russia.
Fenkner intends to continue at helm, because it is what he likes to do. He also has his own money invested in the fund, which, he says, "helps keep the mind focused" on performance.
www.businessneweurope.eu
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