Business New Europe
Jason Corcoran in Moscow
March 18, 2008
UK-listed investment group Polar Capital is shutting its Moscow office in March after deciding to relocate its Eastern European operations to the Ukrainian capital Kyiv, citing a lack of quality deals in Russia and the growing attractiveness of Ukraine's economy.
"Russia is entering a period of sub-par returns compared to historical margins and some of the value had disappeared," Anton Khmelnitski, Polar's Moscow-based director, told bne. "Ukraine is insulated from the credit fallout and there's no downside to its top-five stocks, which we won't be able to short. The underlining reason is that we simply need to be closer to our investments."
Polar, which runs traditional and hedge funds, has cut the Russian exposure of its $220m Elbrus fund to 15% from 70% six months ago, and has sold down its holdings in blue-chips such as Russia's electricity monopoly UES and Golden Telecom. "There's a lot of good stuff still in Russia, but we are a boutique and we have more room to manoeuvre in smaller countries like Ukraine, which is about five years behind Russia," Khmelnitski says.
Contrarians
Polar's view on Russian stocks is at odds with Moscow's analyst community, who feel there could be 60% upside this year when the current sell-off ends. Russia's RTS index is down around 13% from the record high hit on December 12, after falling by as much as 20%. "A 20% fall from the high is regarded as a bear market for equities and, historically, in global markets it is a level when buying resumes," says Chris Weafer, chief strategist at Moscow's UralSib.
However, Khmelnitski believes that Ukraine will outpace Russia or any other place in a bull market and during a global slowdown because it's "cut off from the international capital markets." Ukraine's main stock exchange, the PFTS, grew last year 135.4% and is down by about 10% from the start of this year.
"The investment banks are all wrong because they are driven by other considerations. Just ask any banks in Europe which market has received most bank M&A activity, its Ukraine," explains Khmelnitski. "The Russian top-down situation qualifies best, as I often say, as a macro-trap with little value bottom up. See the performance of IPOs - excess liquidity will fall to 15% and eventually to zero."
Khmelnitski joined Polar Capital in April 2006 from Kazimir Partners, which was previously known as Brunswick Asset Management. He spent three years at Kazimir as head of equities. Prior to Brunswick, Khmelnitski was at Swiss group Pictet Asset Management in London where he spent almost six years managing the Eastern European Trust, a $100m exchange-listed company, which collected a number of awards for its performance and investment style. At the same time, he was also responsible for $500m of equity investments in Emerging Europe and Pictet's global emerging market oil and gas sector. Khmelnitski was born in Moscow, but grew up and received his education in Switzerland. A cerebral and quietly spoken man, he holds a Certificate in Financial Engineering from the FAME Foundation.
Khmelnitski says Polar will launch a new Ukrainian fund to invest $500m in public and private companies at early stages and those launching IPOs. Four analysts are to be hired, in addition to the two fund managers transferring from Moscow. Polar has already taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon Ukrainian Properties and Development fund. The fund also made money through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kyiv operation will primarily focus on property, domestic food, pharmaceuticals, high-tech firms and insurance companies. "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," says Khmelnitski. "Accession to the WTO is a milestone event and will be key to this economy. "
Polar joins Sweden's East Capital as one of the few foreign investors to set up in Ukraine. East Capital's Bering Ukraine fund has grown to $304.68m and is up 180% since its inception. Investment banks are also being drawn to one of the best performing stock exchanges in the world last year. Credit Suisse opened a representative office in April, while Russia's Renaissance Capital has a full-service operation, competing with domestic market leaders Dragon Capital and Concorde. In November, Deutsche Bank said it was going to open an affiliated branch in Ukraine when the country joins the World Trade Organization.
www.businessneweurope.eu
Showing posts with label WTO. Show all posts
Showing posts with label WTO. Show all posts
Tuesday, 18 March 2008
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.”
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