Financial News
Jason Corcoran
17 August 2009
Letter from Moscow
The great purge in Moscow’s banking sector is over. Pay and staff were cut to the bone, but wages are now back to near pre-crisis levels, with annual guarantees of $2m to $3m ensuring that the hiring carousel is back in action.
Russian markets have rallied a year after being pistol-whipped by the international credit crunch, and roiled by a five-day war in Georgia, a domestic banking crisis and a series of investor scandals.
Russia’s RTS and Micex stock exchanges have won back trading lost to the London Stock Exchange and have recovered from their 80% plunge in value.
The upheaval caused by the market’s meltdown resulted in the effective nationalisation of brokerage KIT Finance and mid-tier lenders Globex and Svyaz Bank. Renaissance Capital was forced to accept a $500m investment last September from billionaire Mikhail Prokhorov in return for the sale of a 50% holding while Troika Dialog sold a 30% stake to South Africa’s Standard Bank.
RenCap, once the standard-bearer for Russian investment banking, slashed its staff by about half, and Troika by 35%.
Western banks, which had built aggressively in Moscow since 2007, were also forced to retrench as equity and credit markets shrivelled.
RenCap is hiring for selective areas and has increased salaries in Moscow by 20% and in London by 10%, which returns most surviving staff’s pay to pre-crisis levels. Deutsche Bank, the largest foreign investment bank in Russia, said it had never cut wages and had raised them in some departments by 15% to 20% from July 1.
As dealmaking has returned in oil and gas and in pockets elsewhere, owners and country heads are starting to worry about hanging on to their best people. Credit Suisse has fought to retain its sales staff in Moscow after an attempted raid by Goldman Sachs.
The Swiss bank was forced to authorise $2m guarantees after Goldman tried to swoop, according to a source close to the matter.
Goldman, which has struggled to break into the top five in any of the Russian league tables, has been linked with a move for several of Moscow’s best-known rainmakers.
The rumour mill went into overdrive this month after Alfa Bank’s Edward Kaufman had lunch with Chris Barter, co-chief executive of Goldman Sachs in Russia. Kaufman insists the issue never came up and that he is happy to stay at Alfa, where he is taking charge of “a revenue opportunity” to merge the group’s investment bank and the corporate bank. He said its fixed-income and equities divisions had recorded their best two quarters and corporate finance deals were growing rapidly.
At the height of the war on talent in 2007, Kaufman gained notoriety after being hired from UBS for a reputed $15m over two years. Sources close to Alfa suggest Kaufman has in the past few weeks signed a new two-year contract that is more lucrative than the original package.
Goldman is not the only outsider looking to land a senior banker to break into Russian dealmaking. Merrill Lynch has hired a co-head for its global market team in Russia from MDM Bank and is rumoured to be close to be bringing a head trader on board.
Barclays Capital is understood to be whittling down a short list of top bankers to head its expanded business in Moscow.
Swiss bank UBS is close to naming senior hires for investment and private banking while state-controlled VTB Capital continues its build-out into equities following its startling progress this year in debt capital markets.
One leading headhunter said: “The merry-go-round of hiring is back on. It won’t be as dizzy as 2007, but we have more work than we can handle and we are having to partner with other firms.”
Showing posts with label investment banking. Show all posts
Showing posts with label investment banking. Show all posts
Sunday, 23 August 2009
Sunday, 9 August 2009
Russian banks back on the hunt for talent
Financial News
Jason Corcoran in Moscow
31 Jul 2009
VTB Capital and Troika Dialog have both boosted their equity sales and trading desks as recruiters report a summer uptick in hiring by Moscow-based investment banks.
State-controlled VTB has hired Vlad Markovskiy from UBS and Denis Gorvat from ING for its equity trading operation.
The bank, which launched just over a year ago, wants to build on its success in debt capital markets by building out an equity brokerage. VTB is ranked number two in the league table of arrangers of Eurobonds in the Russia and Commonwealth of Independent States debt capital markets for the first six months of 2009, according to data provider CBonds.
Separately, domestic peer Troika has hired Jim Bevan and Marcus Martin in London to replace a sales and trading team that quit for VTB in June. Both join from Nomura International in London.
The pair, will replace Will Lynch, Peter Walker and Richard Phillips who left to join VTB’s growing presence in London, one of its three global hubs.
VTB and Troika are the latest hires from banks in Moscow, where recruitment is beginning to pick up, according to headhunters.
Taras Rybak, a managing partner at headhunters Brain Source, said: “The hiring freeze at the bulge brackets and the Russian banks in Moscow ended several months ago. Most banks are looking to hire selectively now that the domestic recovery has spread from M&A and the equity markets to the debt capital markets.”
Bank of America Merrill Lynch last week recruited Sergey Babayan from Russian bank MDM as managing director and co-head of the bank’s global markets team in Moscow. Russian brokerages Aton Captial and Otrkritie have been also hiring.
The relaunched investment banking business of Aton has hired Ivan Nikolaev and Maxim Kabanov as a senior analyst and vice president of equity and fixed income sales, respectively. Both had previously been employed by Renaissance Capital.
Otrkrite has also tapped a former Rencap employee having hired George Zarya as senior sales executive for DMA (direct market access), which allows buy-side institutions to access liquidity venues without having to go through an execution desk. Zarya had been at Rencap for over three years working on international DMA sales until a month ago.
Jason Corcoran in Moscow
31 Jul 2009
VTB Capital and Troika Dialog have both boosted their equity sales and trading desks as recruiters report a summer uptick in hiring by Moscow-based investment banks.
State-controlled VTB has hired Vlad Markovskiy from UBS and Denis Gorvat from ING for its equity trading operation.
The bank, which launched just over a year ago, wants to build on its success in debt capital markets by building out an equity brokerage. VTB is ranked number two in the league table of arrangers of Eurobonds in the Russia and Commonwealth of Independent States debt capital markets for the first six months of 2009, according to data provider CBonds.
Separately, domestic peer Troika has hired Jim Bevan and Marcus Martin in London to replace a sales and trading team that quit for VTB in June. Both join from Nomura International in London.
The pair, will replace Will Lynch, Peter Walker and Richard Phillips who left to join VTB’s growing presence in London, one of its three global hubs.
VTB and Troika are the latest hires from banks in Moscow, where recruitment is beginning to pick up, according to headhunters.
Taras Rybak, a managing partner at headhunters Brain Source, said: “The hiring freeze at the bulge brackets and the Russian banks in Moscow ended several months ago. Most banks are looking to hire selectively now that the domestic recovery has spread from M&A and the equity markets to the debt capital markets.”
Bank of America Merrill Lynch last week recruited Sergey Babayan from Russian bank MDM as managing director and co-head of the bank’s global markets team in Moscow. Russian brokerages Aton Captial and Otrkritie have been also hiring.
The relaunched investment banking business of Aton has hired Ivan Nikolaev and Maxim Kabanov as a senior analyst and vice president of equity and fixed income sales, respectively. Both had previously been employed by Renaissance Capital.
Otrkrite has also tapped a former Rencap employee having hired George Zarya as senior sales executive for DMA (direct market access), which allows buy-side institutions to access liquidity venues without having to go through an execution desk. Zarya had been at Rencap for over three years working on international DMA sales until a month ago.
Monday, 8 June 2009
Deals come back into vogue after lean start to year
Financial News
Jason Corcoran in Moscow
01 June 2009
The volume of mergers and acquisitions deals in Russia and eastern Europe recovered in April after a barren time for advisers in the first few months of the year.
Data from Thomson Reuters showed the volume of dealmaking in Russia soared to $8.3bn (€5.9bn) during April, compared with $2.4bn and $3bn recorded during February and March, respectively. The number of deals also rose to 340 in April, from 238 in March and 254 in February.
Across eastern Europe, the rally began in March and was just as pronounced. Volumes rose to just under $6bn for both March and April, compared with $1bn for January and February combined.
However, compared with last year, volumes fell 67.5% in Russia and 76% in eastern Europe in the first five months of this year.
The fall would have been greater, were it not for three big deals in the oil and gas sector. According to figures from data provider Mergers.ru, Russia’s M&A market value in the first quarter of this year was $12.5bn – and about half of that came from those three deals: investment group Basic Element acquiring Russian private oil firm RussNeft, India’s ONGC Group’s acquisition of London-listed Imperial Energy, and Gazprom taking control of the NIS oil monopoly in Serbia.
Mergers.ru noted that several deals were likely to close in the second quarter, such as the merger of MDM Bank and Ursa Bank, and South Africa’s Standard Bank taking a 33% stake in Russian investment bank Troika Dialog.
Oil company TNK-BP said it would continue to seek acquisition opportunities in Russia after losing out to Gazprom Neft for a stake in the troubled UK-listed Russian oil producer Sibir Energy.
Apart from the energy sector, bankers believe the buoyant retail and consumer segment remains the most attractive for foreign entrants.
Russian daily Kommersant last week reported that a UK supermarket chain had appointed Goldman Sachs to explore an expansion strategy into Russia. A Goldman Sachs spokeswoman declined to comment.
Wal-Mart, America’s largest retailer, said it might expand into Russia to take advantage of its fragmented retail market while French retailer Carrefour has been circling Seventh Continent, an upmarket grocery chain, for several months.
Jason Corcoran in Moscow
01 June 2009
The volume of mergers and acquisitions deals in Russia and eastern Europe recovered in April after a barren time for advisers in the first few months of the year.
Data from Thomson Reuters showed the volume of dealmaking in Russia soared to $8.3bn (€5.9bn) during April, compared with $2.4bn and $3bn recorded during February and March, respectively. The number of deals also rose to 340 in April, from 238 in March and 254 in February.
Across eastern Europe, the rally began in March and was just as pronounced. Volumes rose to just under $6bn for both March and April, compared with $1bn for January and February combined.
However, compared with last year, volumes fell 67.5% in Russia and 76% in eastern Europe in the first five months of this year.
The fall would have been greater, were it not for three big deals in the oil and gas sector. According to figures from data provider Mergers.ru, Russia’s M&A market value in the first quarter of this year was $12.5bn – and about half of that came from those three deals: investment group Basic Element acquiring Russian private oil firm RussNeft, India’s ONGC Group’s acquisition of London-listed Imperial Energy, and Gazprom taking control of the NIS oil monopoly in Serbia.
Mergers.ru noted that several deals were likely to close in the second quarter, such as the merger of MDM Bank and Ursa Bank, and South Africa’s Standard Bank taking a 33% stake in Russian investment bank Troika Dialog.
Oil company TNK-BP said it would continue to seek acquisition opportunities in Russia after losing out to Gazprom Neft for a stake in the troubled UK-listed Russian oil producer Sibir Energy.
Apart from the energy sector, bankers believe the buoyant retail and consumer segment remains the most attractive for foreign entrants.
Russian daily Kommersant last week reported that a UK supermarket chain had appointed Goldman Sachs to explore an expansion strategy into Russia. A Goldman Sachs spokeswoman declined to comment.
Wal-Mart, America’s largest retailer, said it might expand into Russia to take advantage of its fragmented retail market while French retailer Carrefour has been circling Seventh Continent, an upmarket grocery chain, for several months.
Sunday, 17 May 2009
JP Morgan names Russia investment banking chief
Financial News
Jason Corcoran in Moscow
15 May 2009
Jeffrey Costello, chief executive of JP Morgan in Russia, has taken over as head of investment banking in Moscow following the surprise departure of Natalia Tsukanova to take up a role as an adviser to the Kremlin.
JP Morgan said Costello had taken over Tsukanova’s duties temporarily following her departure last month to advise the Russian government on it foreign acquisition plans.
Investment banking sources said Tsukanova had been tapped by Igor Sechin, deputy prime minister and energy giant Rosneft chairman, to advise the government on foreign acquisitions in the oil and gas sector.
“Tsukanova was with JP for 12 years and wanted to try something new. This was an offer she felt she couldn’t refuse,” said a banker close to the situation.
A Moscow spokeswoman for JP Morgan said Costello was taking over until a suitable replacement could be found. It was too early to say whether internal or external candidates will be sought.
Tsukanova’s investment banking team has had a good run over the past few years. Its bankers acted as joint bookrunner on the $10.7bn (€7.9bn) flotation of Rosneft and was one of the two international placement agents for Sberbank’s $8.8bn flotation. It has traded leading M&A adviser status in Russia with Credit Suisse over the past three years.
Russia’s capital markets have quietened down this year compared to the boom in mergers and acquisitions last year. JP Morgan is the second leading adviser for the year to date, having advised on two deals worth $7.5bn. In 2008, JP Morgan advised on eight deals during the entire year worth a total of $18.1bn.
Costello was hired in March last year as JP’s first Moscow chief executive. He spent five years as chief executive of UBS' Moscow-based investment banking joint venture UBS Brunswick until taking time out of the banking industry in 2004.
Jason Corcoran in Moscow
15 May 2009
Jeffrey Costello, chief executive of JP Morgan in Russia, has taken over as head of investment banking in Moscow following the surprise departure of Natalia Tsukanova to take up a role as an adviser to the Kremlin.
JP Morgan said Costello had taken over Tsukanova’s duties temporarily following her departure last month to advise the Russian government on it foreign acquisition plans.
Investment banking sources said Tsukanova had been tapped by Igor Sechin, deputy prime minister and energy giant Rosneft chairman, to advise the government on foreign acquisitions in the oil and gas sector.
“Tsukanova was with JP for 12 years and wanted to try something new. This was an offer she felt she couldn’t refuse,” said a banker close to the situation.
A Moscow spokeswoman for JP Morgan said Costello was taking over until a suitable replacement could be found. It was too early to say whether internal or external candidates will be sought.
Tsukanova’s investment banking team has had a good run over the past few years. Its bankers acted as joint bookrunner on the $10.7bn (€7.9bn) flotation of Rosneft and was one of the two international placement agents for Sberbank’s $8.8bn flotation. It has traded leading M&A adviser status in Russia with Credit Suisse over the past three years.
Russia’s capital markets have quietened down this year compared to the boom in mergers and acquisitions last year. JP Morgan is the second leading adviser for the year to date, having advised on two deals worth $7.5bn. In 2008, JP Morgan advised on eight deals during the entire year worth a total of $18.1bn.
Costello was hired in March last year as JP’s first Moscow chief executive. He spent five years as chief executive of UBS' Moscow-based investment banking joint venture UBS Brunswick until taking time out of the banking industry in 2004.
Sunday, 22 February 2009
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.
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.
Sunday, 14 December 2008
Deutsche Bank cuts 30% of Russia global markets staff
Dow Jones Newswires and Financial News
Jason Corcoran in Moscow
08 December 2008
Deutsche Bank is cutting 30% of staff from its global markets division in Moscow where it has been the biggest and most successful bulge bracket bank during Russia's capital markets boom.
Up to 30% of its Moscow-based global markets staff are expected to lose their jobs, double the proportion of employees being cut across Deutsche Bank's global markets business as part of a worldwide redundancy programme.
Bankers working in sales, trading and research in Moscow were made redundant last week with more layoffs expected this week, according to two sources inside the bank.
One said: "We have been told 30% has been earmarked across the board." The second said: "Ten of the research guys have gone."
A Deutsche Bank spokesman in Moscow said the job losses represented 2% of its 950 workforce but declined to comment on potential job losses in other areas of the business.
A statement from Deutsche Bank said: "As part of a global restructuring programme in global markets, Deutsche Bank is making investments in several areas for 2009, including commodities, FX and cash equities. Also as part of the programme and based upon projected client activity, it is making redundancies in exotic structured products, credit origination and proprietary trading."
Last week, Deutsche Bank began cutting 900 jobs across its global markets division, representing 15% of the business's staff.
Moscow-based sources at the bank said the job losses last week were confined to the global markets division, which does not encompass capital markets or mergers and acquisitions.
Deutsche Bank has led the way in Moscow's capital markets since it bought a stake in the investment banking boutique United Financial Group in 2004 for $700m. It employs about 950 staff in Moscow.
The bank has consistently been in the top three for Russian debt and equity underwriting and merger and acquisition advisory work and has earned more investment banking fees from the country than any other bank since it defaulted on its domestic debt a decade ago.
More than 1,000 bankers have been cut in recent months by domestically-owned banks Troika Dialog, Renaissance Capital, Alfa-Bank and Uralsib.
Overseas banks have so far been slower to slash after many quit the Russian market following the 1998 financial crisis. UBS said it planned to increase staff. However, Goldman Sachs is cutting its Moscow-based employees by 10%.
Jason Corcoran in Moscow
08 December 2008
Deutsche Bank is cutting 30% of staff from its global markets division in Moscow where it has been the biggest and most successful bulge bracket bank during Russia's capital markets boom.
Up to 30% of its Moscow-based global markets staff are expected to lose their jobs, double the proportion of employees being cut across Deutsche Bank's global markets business as part of a worldwide redundancy programme.
Bankers working in sales, trading and research in Moscow were made redundant last week with more layoffs expected this week, according to two sources inside the bank.
One said: "We have been told 30% has been earmarked across the board." The second said: "Ten of the research guys have gone."
A Deutsche Bank spokesman in Moscow said the job losses represented 2% of its 950 workforce but declined to comment on potential job losses in other areas of the business.
A statement from Deutsche Bank said: "As part of a global restructuring programme in global markets, Deutsche Bank is making investments in several areas for 2009, including commodities, FX and cash equities. Also as part of the programme and based upon projected client activity, it is making redundancies in exotic structured products, credit origination and proprietary trading."
Last week, Deutsche Bank began cutting 900 jobs across its global markets division, representing 15% of the business's staff.
Moscow-based sources at the bank said the job losses last week were confined to the global markets division, which does not encompass capital markets or mergers and acquisitions.
Deutsche Bank has led the way in Moscow's capital markets since it bought a stake in the investment banking boutique United Financial Group in 2004 for $700m. It employs about 950 staff in Moscow.
The bank has consistently been in the top three for Russian debt and equity underwriting and merger and acquisition advisory work and has earned more investment banking fees from the country than any other bank since it defaulted on its domestic debt a decade ago.
More than 1,000 bankers have been cut in recent months by domestically-owned banks Troika Dialog, Renaissance Capital, Alfa-Bank and Uralsib.
Overseas banks have so far been slower to slash after many quit the Russian market following the 1998 financial crisis. UBS said it planned to increase staff. However, Goldman Sachs is cutting its Moscow-based employees by 10%.
Monday, 17 November 2008
Russian Banks Face Winter Freeze
Dow Jones International News
By Financial News reporters
17 November 2008
Just a year after they were engaged in a frantic war for the best talent, investment banks in Russia have started slashing hundreds of jobs and cutting pay.
Lay-offs at two of the country's largest domestic investment banks - Troika Dialog and Renaissance Capital - are approaching 1,000, and cuts will end up being substantially deeper than had previously been declared, according to bankers in Moscow.
Troika Dialog has begun cuts expected to total 500, or 35% of its overall staff, according to two bankers at the company. The bank was unavailable for comment. Renaissance Capital will cut 25% of its employees, according to an internal memo sent to staff, which represents about 375 of their overall staff of 1,500. However, bankers there said the figure will be higher.
A Rencap spokesman said nothing had been decided.
Elsewhere, there have also been 20 redundancies at mid-tier broker Trust Bank, according to a banker inside the company. VTB Bank is also cutting staff. Meanwhile, Ed Kaufmann, head of investment banking at Alfa-Bank, said the company was "trimming overall headcount" but is still hiring selectively.
Pay cuts are also in the pipeline. At Troika, those earning more than $3,000 (EUR2,357) a month have been told their pay will be slashed by 25%, according to one banker. Banking group Uralsib's staff have been told their salaries will be cut by 20%, while employees at broker Metropol earning more than $10,000 per month have been told their salaries will also be cut by 20%, according to staff at both companies.
Overseas banks that have piled into the market in the past year appear more resilient however. Merrill Lynch said it was not cutting staff in Moscow and UBS said it plans to increase staff.
www.efinancialnews.com
By Financial News reporters
17 November 2008
Just a year after they were engaged in a frantic war for the best talent, investment banks in Russia have started slashing hundreds of jobs and cutting pay.
Lay-offs at two of the country's largest domestic investment banks - Troika Dialog and Renaissance Capital - are approaching 1,000, and cuts will end up being substantially deeper than had previously been declared, according to bankers in Moscow.
Troika Dialog has begun cuts expected to total 500, or 35% of its overall staff, according to two bankers at the company. The bank was unavailable for comment. Renaissance Capital will cut 25% of its employees, according to an internal memo sent to staff, which represents about 375 of their overall staff of 1,500. However, bankers there said the figure will be higher.
A Rencap spokesman said nothing had been decided.
Elsewhere, there have also been 20 redundancies at mid-tier broker Trust Bank, according to a banker inside the company. VTB Bank is also cutting staff. Meanwhile, Ed Kaufmann, head of investment banking at Alfa-Bank, said the company was "trimming overall headcount" but is still hiring selectively.
Pay cuts are also in the pipeline. At Troika, those earning more than $3,000 (EUR2,357) a month have been told their pay will be slashed by 25%, according to one banker. Banking group Uralsib's staff have been told their salaries will be cut by 20%, while employees at broker Metropol earning more than $10,000 per month have been told their salaries will also be cut by 20%, according to staff at both companies.
Overseas banks that have piled into the market in the past year appear more resilient however. Merrill Lynch said it was not cutting staff in Moscow and UBS said it plans to increase staff.
www.efinancialnews.com
Russia braced for a bleak winter
Financial News
Jason Corcoran in Moscow and Harry Wilson
17 Nov 2008
Moscow-based investment bankers are at the sharp end of job cuts
Russian index slumps
It seems like a different age, but it was only recently that Moscow-based investment bankers had firms fighting to secure their services and could command pay packages commensurate with demand.
Senior Moscow-based bankers and those covering the Russian markets asked for and got lucrative pay deals as local brokers and large international investment banks fought a hiring war to build their businesses in the country.
Guaranteed packages in excess of $10m (€7.8m) were not unheard of and even junior staff with experience of the Russian markets received $1m guarantees to join rivals.
In early 2007, Russian investment bank Alfa-Bank recruited the head of UBS’ Moscow office Ed Kaufman for a reputed $20m over two years.
Speaking to Financial News at the time of his hiring by Alfa, Kaufman described his package as “very generous”, while declining to comment on the specifics.
US investment banks including Lehman Brothers spent similar sums to secure top bankers from rivals to give them the entrance they desperately wanted into Russia’s booming natural resources-fuelled economy.
However, after two and a half months in which the Russian stock market has lost 70% of its value and with the oil price at a three-year low, the days of the multi-million dollar guaranteed package are history and the hiring boom has turned on its head as the axe begins to fall on bloated and expensive banking teams.
Last week, Russia’s largest independent investment bank, Troika Dialog, began culling 20% of its workforce with the loss of about 300 jobs. However, the cut could be more severe and as many as 500 jobs are potentially at risk, equal to 35% of its staff.
Troika’s redundancies followed similar cuts at main Moscow-based rival Renaissance Capital, which after accepting a $500m investment from Russian billionaire Mikhail Prokhorov was forced to make hundreds of employees redundant as it cut a quarter of its staff.
Renaissance Capital had become known within the international banking community for its lucrative pay packets, which included large grants of stock and generous guarantees.
In 2007, Renaissance Capital’s total staff compensation bill came to $370m, equating to an average payout of more than $300,000 for each of the firm’s 1,145 employees.
Until recently, Renaissance Capital was deluged with CVs from staff at investment banks looking to escape job cuts in their own firms and join the seemingly invulnerable Russian boom.
Weeks before it was forced to accept Prokhorov’s money, Renaissance Capital hired John Porter, Morgan Stanley’s head of Middle Eastern and African equity capital markets, to lead its growth in the region.
Speaking to Financial News in the wake of Prokhorov’s investment, Renaissance Capital’s co-head of investment banking Andrew Cornthwaite said: “We have always taken the view that if you are involved in these markets you have to accept that some things will go badly wrong from time to time. We are comfortable with that.”
The hiring freeze has hit institutions thought to be relatively immune, such as state-owned bank VTB, which had spent hundreds of millions of dollars in the past 18 months building its investment banking business.
In a statement, VTB said it had frozen recruitment and would focus on risk management, setting up a unit to cope with the fallout from the financial crisis.
However, for staff made redundant by Russian investment banks the terms are still generous. Troika employees who lose their jobs will receive between five and eight months’ salary, which in many cases will not be far off the length of time employees had worked for the firm.
International banks are starting to scale back the size of their Russian operations too, just over 10 years after many of the same banks shut up shop in Moscow in the wake of the Russian Government’s default.
A Russian investment banker said: “It is different to 1998. Then, the pull back was focused on Russia; this time it is part of global retrenchment by banks to what they consider their core businesses.”
Rivals say Goldman Sachs is scaling back its staff in Moscow, though a source at the bank said it was currently “assessing market conditions, while the jobs of former ABN Amro employees are likely to be vulnerable in the wake of RBS’ announcement last week that it would make 3,000 redundant in its global banking and markets business.
This is a change from 11 months ago, when bankers such as Merrill Lynch chairman and chief executive John Thain flew into Moscow amid fanfare in the local and international media to meet then President Putin and open the bank’s Moscow office.
One banker at a Russian bank said: “Everyone has been hiring like mad for the last couple of years, but the party is well and truly over now.”
Merrill Lynch insisted it is not cutting staff in Moscow despite widespread rumours it is preparing to dismiss staff and even close the office. One source close to the bank said it was preparing to expand the operation. Despite the sombre mood in the Russian market, fee levels are not far down on 2007 and are substantially up on previous years.
Russian investment banking revenues for the year so far stand at $1.53bn, according to investment banking data provider Dealogic, down 13% on the same point last year, but up more than 50% on the same point in 2006, when fees hit a then record of $1.14bn.
Steve Meehan, head of UBS in Russia, said: “The number of competitors in this market will be reduced dramatically. For the long term, this correction will be positive for banks like us.”
The long-term prognosis for Russia is positive and, despite the fall in oil prices, most admit this is only a temporary blip. One Russian banker said: “The long-term trend has got to be for higher energy prices and Russia will obviously benefit from this. What you’re seeing now is the bursting of a bubble, not the end of Russia.”
Meehan said: “Russia is the only country that has got a top-10 position in all the mineral resources that matter."
Jason Corcoran in Moscow and Harry Wilson
17 Nov 2008
Moscow-based investment bankers are at the sharp end of job cuts
Russian index slumps
It seems like a different age, but it was only recently that Moscow-based investment bankers had firms fighting to secure their services and could command pay packages commensurate with demand.
Senior Moscow-based bankers and those covering the Russian markets asked for and got lucrative pay deals as local brokers and large international investment banks fought a hiring war to build their businesses in the country.
Guaranteed packages in excess of $10m (€7.8m) were not unheard of and even junior staff with experience of the Russian markets received $1m guarantees to join rivals.
In early 2007, Russian investment bank Alfa-Bank recruited the head of UBS’ Moscow office Ed Kaufman for a reputed $20m over two years.
Speaking to Financial News at the time of his hiring by Alfa, Kaufman described his package as “very generous”, while declining to comment on the specifics.
US investment banks including Lehman Brothers spent similar sums to secure top bankers from rivals to give them the entrance they desperately wanted into Russia’s booming natural resources-fuelled economy.
However, after two and a half months in which the Russian stock market has lost 70% of its value and with the oil price at a three-year low, the days of the multi-million dollar guaranteed package are history and the hiring boom has turned on its head as the axe begins to fall on bloated and expensive banking teams.
Last week, Russia’s largest independent investment bank, Troika Dialog, began culling 20% of its workforce with the loss of about 300 jobs. However, the cut could be more severe and as many as 500 jobs are potentially at risk, equal to 35% of its staff.
Troika’s redundancies followed similar cuts at main Moscow-based rival Renaissance Capital, which after accepting a $500m investment from Russian billionaire Mikhail Prokhorov was forced to make hundreds of employees redundant as it cut a quarter of its staff.
Renaissance Capital had become known within the international banking community for its lucrative pay packets, which included large grants of stock and generous guarantees.
In 2007, Renaissance Capital’s total staff compensation bill came to $370m, equating to an average payout of more than $300,000 for each of the firm’s 1,145 employees.
Until recently, Renaissance Capital was deluged with CVs from staff at investment banks looking to escape job cuts in their own firms and join the seemingly invulnerable Russian boom.
Weeks before it was forced to accept Prokhorov’s money, Renaissance Capital hired John Porter, Morgan Stanley’s head of Middle Eastern and African equity capital markets, to lead its growth in the region.
Speaking to Financial News in the wake of Prokhorov’s investment, Renaissance Capital’s co-head of investment banking Andrew Cornthwaite said: “We have always taken the view that if you are involved in these markets you have to accept that some things will go badly wrong from time to time. We are comfortable with that.”
The hiring freeze has hit institutions thought to be relatively immune, such as state-owned bank VTB, which had spent hundreds of millions of dollars in the past 18 months building its investment banking business.
In a statement, VTB said it had frozen recruitment and would focus on risk management, setting up a unit to cope with the fallout from the financial crisis.
However, for staff made redundant by Russian investment banks the terms are still generous. Troika employees who lose their jobs will receive between five and eight months’ salary, which in many cases will not be far off the length of time employees had worked for the firm.
International banks are starting to scale back the size of their Russian operations too, just over 10 years after many of the same banks shut up shop in Moscow in the wake of the Russian Government’s default.
A Russian investment banker said: “It is different to 1998. Then, the pull back was focused on Russia; this time it is part of global retrenchment by banks to what they consider their core businesses.”
Rivals say Goldman Sachs is scaling back its staff in Moscow, though a source at the bank said it was currently “assessing market conditions, while the jobs of former ABN Amro employees are likely to be vulnerable in the wake of RBS’ announcement last week that it would make 3,000 redundant in its global banking and markets business.
This is a change from 11 months ago, when bankers such as Merrill Lynch chairman and chief executive John Thain flew into Moscow amid fanfare in the local and international media to meet then President Putin and open the bank’s Moscow office.
One banker at a Russian bank said: “Everyone has been hiring like mad for the last couple of years, but the party is well and truly over now.”
Merrill Lynch insisted it is not cutting staff in Moscow despite widespread rumours it is preparing to dismiss staff and even close the office. One source close to the bank said it was preparing to expand the operation. Despite the sombre mood in the Russian market, fee levels are not far down on 2007 and are substantially up on previous years.
Russian investment banking revenues for the year so far stand at $1.53bn, according to investment banking data provider Dealogic, down 13% on the same point last year, but up more than 50% on the same point in 2006, when fees hit a then record of $1.14bn.
Steve Meehan, head of UBS in Russia, said: “The number of competitors in this market will be reduced dramatically. For the long term, this correction will be positive for banks like us.”
The long-term prognosis for Russia is positive and, despite the fall in oil prices, most admit this is only a temporary blip. One Russian banker said: “The long-term trend has got to be for higher energy prices and Russia will obviously benefit from this. What you’re seeing now is the bursting of a bubble, not the end of Russia.”
Meehan said: “Russia is the only country that has got a top-10 position in all the mineral resources that matter."
Tuesday, 28 October 2008
VTB opens overseas offices
Financial News
Jason Corcoran in Moscow
28 October 2008
Russian state bank VTB is defying the global downturn and dismal domestic markets by opening new sales and representative offices for its investment banking arm in New York and Dubai.
Yulia Chupina, the VTB board member responsible for the expansion of its investment banking subsidiary, said the bank would open offices shortly in the US and Dubai.
She said: "We are being cost conscious by freezing hiring and development in some areas while continuing to develop in other areas."
VTB has already established three investment banking hubs in Moscow, London, and Singapore. It has dominated this year's hiring war in Russia by recruiting bankers from Deutsche Bank and key figures from a number of banks in Moscow.
In response to the crisis, the bank said it was considering cutting costs by between 15% and 20%, and had postponed a move into its new offices in Federation Tower, the tallest skyscraper in the emerging business district of Moscow City.
Chupina confirmed that VTB was no longer interested in buying a stake in Renaissance Capital's troubled consumer lending arm Renaissance Credit.
The bank is believed to have abandoned the deal after Renaissance Capital founder Stephen Jennings declined to cede control.
—Write to Jason Corcoran at jasonwcorcoran@googlemail.com
Jason Corcoran in Moscow
28 October 2008
Russian state bank VTB is defying the global downturn and dismal domestic markets by opening new sales and representative offices for its investment banking arm in New York and Dubai.
Yulia Chupina, the VTB board member responsible for the expansion of its investment banking subsidiary, said the bank would open offices shortly in the US and Dubai.
She said: "We are being cost conscious by freezing hiring and development in some areas while continuing to develop in other areas."
VTB has already established three investment banking hubs in Moscow, London, and Singapore. It has dominated this year's hiring war in Russia by recruiting bankers from Deutsche Bank and key figures from a number of banks in Moscow.
In response to the crisis, the bank said it was considering cutting costs by between 15% and 20%, and had postponed a move into its new offices in Federation Tower, the tallest skyscraper in the emerging business district of Moscow City.
Chupina confirmed that VTB was no longer interested in buying a stake in Renaissance Capital's troubled consumer lending arm Renaissance Credit.
The bank is believed to have abandoned the deal after Renaissance Capital founder Stephen Jennings declined to cede control.
—Write to Jason Corcoran at jasonwcorcoran@googlemail.com
Tuesday, 12 August 2008
Former Goldman banker turns back on UniCredit for Merrill
Dow Jones - Financial News
Jason Corcoran in Moscow
12 Aug 2008
US bank Merrill Lynch has hired a former leading Goldman Sachs banker in Russia, who was supposed to be joining UniCredit's operation in Moscow, as co-head of investment banking in Russia.
The Italian bank UniCredit, which acquired Russian brokerage Aton 18 months ago, told Financial News in June that Amiran Kanchaveli, an executive director at Goldman Sachs, was joining as co-head of investment banking.
However, Kanchaveli, who previously worked at ABN AMRO alongside the prime minister of Georgia, Vladimir Gurgenidze, changed his mind.
A source familiar with the situation said Kanchaveli had opted to join Merrill Lynch instead and had recently taken up a senior position in investment banking.
The bank is also hiring additional staff in equity sales and trading, along with fixed income, according to a Merrill Lynch insider.
On a visit to Moscow earlier this year, Merrill Lynch chief executive John Thain said the bank was going to expand rather than lay off employees in Russia.
The bank has recently been one of the strongest players in Russia's burgeoning mergers & acquisition advisory market but is looking to build brokerage capabilities as well.
Russia remains one of the most competitive markets in investment banking for talent in spite of Russian equity issuance drying up and flagging domestic markets, in the wake of allegations of price fixing at mining group Mechel and the outbreak of hostilities with Georgia in the breakaway republic of Southern Ossetia.
Jason Corcoran in Moscow
12 Aug 2008
US bank Merrill Lynch has hired a former leading Goldman Sachs banker in Russia, who was supposed to be joining UniCredit's operation in Moscow, as co-head of investment banking in Russia.
The Italian bank UniCredit, which acquired Russian brokerage Aton 18 months ago, told Financial News in June that Amiran Kanchaveli, an executive director at Goldman Sachs, was joining as co-head of investment banking.
However, Kanchaveli, who previously worked at ABN AMRO alongside the prime minister of Georgia, Vladimir Gurgenidze, changed his mind.
A source familiar with the situation said Kanchaveli had opted to join Merrill Lynch instead and had recently taken up a senior position in investment banking.
The bank is also hiring additional staff in equity sales and trading, along with fixed income, according to a Merrill Lynch insider.
On a visit to Moscow earlier this year, Merrill Lynch chief executive John Thain said the bank was going to expand rather than lay off employees in Russia.
The bank has recently been one of the strongest players in Russia's burgeoning mergers & acquisition advisory market but is looking to build brokerage capabilities as well.
Russia remains one of the most competitive markets in investment banking for talent in spite of Russian equity issuance drying up and flagging domestic markets, in the wake of allegations of price fixing at mining group Mechel and the outbreak of hostilities with Georgia in the breakaway republic of Southern Ossetia.
Monday, 11 August 2008
Deutsche Bank emerges as top fee earner in Russia
Dow Jones: Financial News
Jason Corcoran in Moscow
11 Aug 2008
Deutsche Bank has earned more from investment banking fees in Russia in the 10 years since the country defaulted on its domestic debt than any other bank, according to data provider Dealogic. The bank has earned $509m (€336m) for its involvement in mergers and acquisitions, debt and equity capital markets work in the 10 years to the end of last month.
This is substantially more than the $359m earned by second-placed Morgan Stanley, which was just ahead of UBS, JP Morgan and Renaissance Capital, the highest-placed Russian bank.
However, Deutsche Bank has started to lose market share to its competitors over the past five years. Over the five years to the end of July it accounted for 12% of fees in Russia. The total fell to 9.2% in the 12 months to the end of last month.
Raids on its staff have increased over the past year and the bank was almost knocked off its perch as Merrill Lynch, JP Morgan and Renaissance Capital closed the gap.
Western banks such as Goldman Sachs and Lehman Brothers have returned to Moscow. Domestic brokerages Renaissance Capital and Troika Dialog have also gained ground, emerging as strong players in equity capital markets and corporate deals. Russia’s UFC Metropol has earned its first appearance in the top 10 fee earners over the past 12 months.
Russia devalued the rouble by 34% and defaulted on its domestic debt in mid-August 1998, crippling the economy. Deutsche Bank’s Russian subsidiary was established in April that year, four months before the crash. Germany was renowned for providing financial assistance to Russia following the crisis.
Deutsche Bank did not scale back its activities despite the debt crisis. It took a lead role in the resolution of disputes between Russia and international creditors.
Joerg Bongartz, chairman of the board of Deutsche Bank Russia, said: “We are absolutely committed to this market and have been active in Russia for 125 years.” Deutsche Bank was also the top bank in Russia over the past decade by value of deals worked on, according to data provider Thomson Reuters.
It has worked on almost 100 advisory and debt and equity markets deals worth $91bn over the 10 years and eight months from the start of 1998 to August 6 this year, according to Thomson Reuters.
Bongartz, who was working in Moscow in 1998, said: “After the crash, we recapitalised the business and developed in the directions of fixed income, corporate finance and transaction banking. We reallocated our workforce rather than lay people off.”
Deutsche Bank’s position in Russia was cemented by its acquisition of local broker UFG in a two-step deal for $700m. The German bank acquired 40% of UFG in 2003 and the remainder in 2006.
The bank employs about 1,000 bankers in Moscow and provides local and
international clients with corporate finance and advisory, sales and
trading services, as well as wealth management and asset management
services.
The defection of rainmaker Nick Jordan to Lehman Brothers and the
departure of UFG founder Ilya Sherbovich created trouble at the top.
This was exacerbated by raid on talent state run VTB, which has
recruited about 60 of Deutsche's bankers and analysts in the past 12
months.
Bongartz said the pool of talent is deep and can point to the return
of Igor Lojevsky this month from Dresdner Kleinwort to takeover as
country head from Charlie Ryan.
American Ryan, the last remaining co-founder of UFG and Deutsche's key
figurehead in Russia, is stepping back as chief executive and country
head to take up the chairman's role.
Jason Corcoran in Moscow
11 Aug 2008
Deutsche Bank has earned more from investment banking fees in Russia in the 10 years since the country defaulted on its domestic debt than any other bank, according to data provider Dealogic. The bank has earned $509m (€336m) for its involvement in mergers and acquisitions, debt and equity capital markets work in the 10 years to the end of last month.
This is substantially more than the $359m earned by second-placed Morgan Stanley, which was just ahead of UBS, JP Morgan and Renaissance Capital, the highest-placed Russian bank.
However, Deutsche Bank has started to lose market share to its competitors over the past five years. Over the five years to the end of July it accounted for 12% of fees in Russia. The total fell to 9.2% in the 12 months to the end of last month.
Raids on its staff have increased over the past year and the bank was almost knocked off its perch as Merrill Lynch, JP Morgan and Renaissance Capital closed the gap.
Western banks such as Goldman Sachs and Lehman Brothers have returned to Moscow. Domestic brokerages Renaissance Capital and Troika Dialog have also gained ground, emerging as strong players in equity capital markets and corporate deals. Russia’s UFC Metropol has earned its first appearance in the top 10 fee earners over the past 12 months.
Russia devalued the rouble by 34% and defaulted on its domestic debt in mid-August 1998, crippling the economy. Deutsche Bank’s Russian subsidiary was established in April that year, four months before the crash. Germany was renowned for providing financial assistance to Russia following the crisis.
Deutsche Bank did not scale back its activities despite the debt crisis. It took a lead role in the resolution of disputes between Russia and international creditors.
Joerg Bongartz, chairman of the board of Deutsche Bank Russia, said: “We are absolutely committed to this market and have been active in Russia for 125 years.” Deutsche Bank was also the top bank in Russia over the past decade by value of deals worked on, according to data provider Thomson Reuters.
It has worked on almost 100 advisory and debt and equity markets deals worth $91bn over the 10 years and eight months from the start of 1998 to August 6 this year, according to Thomson Reuters.
Bongartz, who was working in Moscow in 1998, said: “After the crash, we recapitalised the business and developed in the directions of fixed income, corporate finance and transaction banking. We reallocated our workforce rather than lay people off.”
Deutsche Bank’s position in Russia was cemented by its acquisition of local broker UFG in a two-step deal for $700m. The German bank acquired 40% of UFG in 2003 and the remainder in 2006.
The bank employs about 1,000 bankers in Moscow and provides local and
international clients with corporate finance and advisory, sales and
trading services, as well as wealth management and asset management
services.
The defection of rainmaker Nick Jordan to Lehman Brothers and the
departure of UFG founder Ilya Sherbovich created trouble at the top.
This was exacerbated by raid on talent state run VTB, which has
recruited about 60 of Deutsche's bankers and analysts in the past 12
months.
Bongartz said the pool of talent is deep and can point to the return
of Igor Lojevsky this month from Dresdner Kleinwort to takeover as
country head from Charlie Ryan.
American Ryan, the last remaining co-founder of UFG and Deutsche's key
figurehead in Russia, is stepping back as chief executive and country
head to take up the chairman's role.
Thursday, 3 July 2008
Russia's new revolution
The Independent
Tuesday, 1 July 2008
Bankers were thought to be facing tough times after the credit crunch. But in Moscow, where business is booming, Brits are being attracted by soaring salaries. By Jason Corcoran and Nick Clark
It has been a very good year to be Russian. The national football team sparkled at Euro 2008, it secured the unrivalled musical accolade of winning the Eurovision Song Contest, and while the markets around the world disintegrate, its own economy has continued to boom.
Soaring consumer spending, oil past $140 a barrel, record numbers of mergers and acquisitions (M&A) and a high growth rate means the financial focus is firmly on Russia in 2008.
Investment bankers in the West are charging to Moscow to cash in on the rise of lucrative takeover deals, as London and New York have increasingly become graveyards for the bulge-bracket institutions. "Foreign bankers are pouring into Mos-cow, that's where the action is," one capital markets professional said yesterday.
The Russian investment banks Renaissance Capital and Troika Dialog have doubled staff in the past 18 months, often looking abroad for expertise, at a time when Western bulge-bracket institutions have been forced to slash headcount in the wake of the credit crunch.
The latest big-name banker to make for Red Square is Nick Harwood, the former head of equities for Central and Eastern Europe, the Middle East and Africa at Citigroup. Mr Harwood will take up a post as deputy head of global markets at Troika Dialog, a Russian investment bank known for its close ties to the Kremlin, in mid-September.
Banks in Moscow are known to offer bankers packages that are well above market rates in the West, yet Mr Harwood, who has worked for Citigroup around the world, said remuneration had not influenced his decision to move. He said: "I am leaving a global market to work in a regional market, but the role will have a much wider remit than equities. Moscow is a very dynamic city and Russia now has the energy of a major economic superpower."
Chris Harvey, the global head of banking at Deloitte, said: "Bankers from the UK are increasingly targeting the emerging markets, especially Russia. The economy is modernising, and while it is not necessarily making headlines in the West, there is a lot of mergers and acquisitions and project finance activity. The country is moving further into the 21st century, and barring micro-economic shocks should continue to grow."
Andrew Keeley, head of financial institutions research at Troika, has spent six years in Moscow, and divides his time between the Russian capital and London. "Bankers moving into Moscow from the West can expect to double their incomes because a major skills shortage still exists here. It's a different culture and it's very dynamic and there are other benefits too," said the 35-year-old from Kent.
This year's battle for banking talent in Moscow has been ignited by the state-controlled bank VTB's move into investment banking. VTB, which raised $8bn in a listing on the London Stock Exchange last year, poached at least 60 bankers from Deut-sche Bank in Moscow to staff its new operation. The German bank responded by hiring scores from American and European rivals, such as Unicredit, UBS and ING. VTB's chief executive, Andrei Kostin, said in March that the group will invest $500m (£250m) and hire 400 people in the next two years to expand its nascent investment banking business.
A source close to VTB said: "Some guys under 30 have arrived without much experience. It's ridiculous. They have doubled their income to $2m a year overnight." The top rainmakers in Russia can command about $8m on two-year deals, according to Jonathan Astbury, a managing director at the headhunter Sandton Group, which works with Renaissance, Troika and Goldman Sachs. He said: "This is a slight premium compared to New York and London, but the main benefit is they are taxed at just 13 per cent across the board, so they are significantly better off in real terms. Certainly, in career terms, we feel the continued malaise in Western markets, notably UK and North America, is making many bankers contemplate Eastern Europe, Middle East and Asia as the main viable career options in the short term."
Some are even commuting, according to senior bankers. One said: "Some guys coming from the West find the transition pretty hard." He said the two overnight flights from London on Sunday nights were increasingly filled with bankers getting in to start work in Moscow on Monday morning. Some of those were on the return flight on Friday afternoons, he said.
One senior UK banker, who has worked in London, New York and Hong Kong, moved to Mos-cow in 2006. He said: "The acceleration of people moving occurred in 2005, and now it is fairly common, including those that commute from London."
It is approaching a decade since the 1998 financial crisis, when the rouble collapsed, the fledgling stock market crashed and the government defaulted on its bonds. The resulting meltdown sent many expats fleeing to Moscow's Sheremetyevo Airport, but the banks have returned, tentatively at first, but emboldened by a fast-growing middle class and a more stable economic and political climate.
Marcus Svedberg, chief economist at East Capital, an asset manager that focuses on Eastern Europe, said: "Ten years ago, the country was nearly bankrupt; now the economy is dynamic and, despite what is happening elsewhere, the growth has been accelerating this year."
As an illustration of some of the advances in the Russian economy, which is based on its oil and gas reserves, Mr Svedberg pointed out that GDP in Russia had risen from $271bn in 1998 to $1.6 trillion this year. At the same time, debt has fallen from 50 per cent of GDP to 3 per cent. Inflation is down from 84 per cent to 10 per cent, while the interest rate has fallen from 150 per cent to 11 per cent.
The country now has an oil fund that has so far invested only in AAA-rated bonds. It is believed that when the mandate is renewed in October, the fund will have a much more aggressive buying strategy.
The American banker Nick Jordan was lured by Lehman Brothers last year from Deutsche for a reputed $10m a year to run its Moscow office. Mr Jordan is based in London but spends three weeks a month in Moscow. He said: "Over the last 15 years banks have moved from being local bond hedge funds to being well-rounded wholesale, commercial and retail banks. It's adding another piece to the puzzle."
Russia's capital markets have been largely insulated from the global credit crunch. M&A has filled the vacuum left by the fall-off in IPOs.
Richard Hainsworth, the founder and general director of RusRating, the bank rating agency, has seen many expats come and go since arriving in Moscow in 1982. Mr Hainsworth's advice to new arrivals in Moscow? "Take a holiday in December, when it gets dark, to Egypt. It makes a big difference. Try to have a lot of patience and count to 10 before reacting."
'It was a culture shock, but I anticipate being here for some time' - Bernard Abdelmalak, Renaissance Capital
From his office on the 46th floor of Moscow City's Naberezhnaya Tower, the banker Bernard Abdelmalak could be forgiven for thinking he was working in Canary Wharf.
The Russian capital's emerging business district, two miles west of the Kremlin on the banks of the Moscow river, is styled on Canary Wharf, although much of the vast development is still a building site.
Mr Abdelmalak, who left his job at Citigroup in London, his home town, a year ago, works for the Russian emerging markets bank Renaissance Capital, which recently shifted most of its workforce to the Presensky district of Moscow.
"Moving here has been a culture shock, and I miss my family and friends, but there is plenty of upside, such as this view and working for a dynamic investment bank in such a fascinating and fast-paced city," he said.
Remuneration is a large part of the upside for bankers trading places from London to Moscow. Mr Abdelmalak, 31, has benefited from a generous increase in salary coupled with a reduced tax rate of 13 per cent.
Renaissance is among a handful of financial institutions, such as Lehman Brothers, Citibank, Standard Bank, KPMG and VTB, that have recently opened offices. Mr Abdelmalak lives in the centre of the city and misses the hubbub of working near the busy commercial thoroughfare of Tverskaya, the city's main artery into Red Square. He said: "There are no shops, no restaurants, no bars, just one Starbucks and two industrial-size canteens, but that's what Canary Wharf was once like."
His position as head of equity product control involves looking after the bank's trades in Africa, as well as its bonds and repos operations. He regularly travels to Kiev, Lagos and Nairobi. Soon that is likely to include Amaty in Kazakhstan.
He is routinely working till 9pm on Mondays and Tuesdays before client and colleague socialising begins mid-week. He takes Russian language lessons two or three times a week. "Life is very different to London. I am out of my comfort zone."
Mr Abdelmalak is taking a long term-view. "If the market here holds as well as it has so far in the global credit crisis, I anticipate being here for some time yet," he said.
Jason Corcoran
Tuesday, 1 July 2008
Bankers were thought to be facing tough times after the credit crunch. But in Moscow, where business is booming, Brits are being attracted by soaring salaries. By Jason Corcoran and Nick Clark
It has been a very good year to be Russian. The national football team sparkled at Euro 2008, it secured the unrivalled musical accolade of winning the Eurovision Song Contest, and while the markets around the world disintegrate, its own economy has continued to boom.
Soaring consumer spending, oil past $140 a barrel, record numbers of mergers and acquisitions (M&A) and a high growth rate means the financial focus is firmly on Russia in 2008.
Investment bankers in the West are charging to Moscow to cash in on the rise of lucrative takeover deals, as London and New York have increasingly become graveyards for the bulge-bracket institutions. "Foreign bankers are pouring into Mos-cow, that's where the action is," one capital markets professional said yesterday.
The Russian investment banks Renaissance Capital and Troika Dialog have doubled staff in the past 18 months, often looking abroad for expertise, at a time when Western bulge-bracket institutions have been forced to slash headcount in the wake of the credit crunch.
The latest big-name banker to make for Red Square is Nick Harwood, the former head of equities for Central and Eastern Europe, the Middle East and Africa at Citigroup. Mr Harwood will take up a post as deputy head of global markets at Troika Dialog, a Russian investment bank known for its close ties to the Kremlin, in mid-September.
Banks in Moscow are known to offer bankers packages that are well above market rates in the West, yet Mr Harwood, who has worked for Citigroup around the world, said remuneration had not influenced his decision to move. He said: "I am leaving a global market to work in a regional market, but the role will have a much wider remit than equities. Moscow is a very dynamic city and Russia now has the energy of a major economic superpower."
Chris Harvey, the global head of banking at Deloitte, said: "Bankers from the UK are increasingly targeting the emerging markets, especially Russia. The economy is modernising, and while it is not necessarily making headlines in the West, there is a lot of mergers and acquisitions and project finance activity. The country is moving further into the 21st century, and barring micro-economic shocks should continue to grow."
Andrew Keeley, head of financial institutions research at Troika, has spent six years in Moscow, and divides his time between the Russian capital and London. "Bankers moving into Moscow from the West can expect to double their incomes because a major skills shortage still exists here. It's a different culture and it's very dynamic and there are other benefits too," said the 35-year-old from Kent.
This year's battle for banking talent in Moscow has been ignited by the state-controlled bank VTB's move into investment banking. VTB, which raised $8bn in a listing on the London Stock Exchange last year, poached at least 60 bankers from Deut-sche Bank in Moscow to staff its new operation. The German bank responded by hiring scores from American and European rivals, such as Unicredit, UBS and ING. VTB's chief executive, Andrei Kostin, said in March that the group will invest $500m (£250m) and hire 400 people in the next two years to expand its nascent investment banking business.
A source close to VTB said: "Some guys under 30 have arrived without much experience. It's ridiculous. They have doubled their income to $2m a year overnight." The top rainmakers in Russia can command about $8m on two-year deals, according to Jonathan Astbury, a managing director at the headhunter Sandton Group, which works with Renaissance, Troika and Goldman Sachs. He said: "This is a slight premium compared to New York and London, but the main benefit is they are taxed at just 13 per cent across the board, so they are significantly better off in real terms. Certainly, in career terms, we feel the continued malaise in Western markets, notably UK and North America, is making many bankers contemplate Eastern Europe, Middle East and Asia as the main viable career options in the short term."
Some are even commuting, according to senior bankers. One said: "Some guys coming from the West find the transition pretty hard." He said the two overnight flights from London on Sunday nights were increasingly filled with bankers getting in to start work in Moscow on Monday morning. Some of those were on the return flight on Friday afternoons, he said.
One senior UK banker, who has worked in London, New York and Hong Kong, moved to Mos-cow in 2006. He said: "The acceleration of people moving occurred in 2005, and now it is fairly common, including those that commute from London."
It is approaching a decade since the 1998 financial crisis, when the rouble collapsed, the fledgling stock market crashed and the government defaulted on its bonds. The resulting meltdown sent many expats fleeing to Moscow's Sheremetyevo Airport, but the banks have returned, tentatively at first, but emboldened by a fast-growing middle class and a more stable economic and political climate.
Marcus Svedberg, chief economist at East Capital, an asset manager that focuses on Eastern Europe, said: "Ten years ago, the country was nearly bankrupt; now the economy is dynamic and, despite what is happening elsewhere, the growth has been accelerating this year."
As an illustration of some of the advances in the Russian economy, which is based on its oil and gas reserves, Mr Svedberg pointed out that GDP in Russia had risen from $271bn in 1998 to $1.6 trillion this year. At the same time, debt has fallen from 50 per cent of GDP to 3 per cent. Inflation is down from 84 per cent to 10 per cent, while the interest rate has fallen from 150 per cent to 11 per cent.
The country now has an oil fund that has so far invested only in AAA-rated bonds. It is believed that when the mandate is renewed in October, the fund will have a much more aggressive buying strategy.
The American banker Nick Jordan was lured by Lehman Brothers last year from Deutsche for a reputed $10m a year to run its Moscow office. Mr Jordan is based in London but spends three weeks a month in Moscow. He said: "Over the last 15 years banks have moved from being local bond hedge funds to being well-rounded wholesale, commercial and retail banks. It's adding another piece to the puzzle."
Russia's capital markets have been largely insulated from the global credit crunch. M&A has filled the vacuum left by the fall-off in IPOs.
Richard Hainsworth, the founder and general director of RusRating, the bank rating agency, has seen many expats come and go since arriving in Moscow in 1982. Mr Hainsworth's advice to new arrivals in Moscow? "Take a holiday in December, when it gets dark, to Egypt. It makes a big difference. Try to have a lot of patience and count to 10 before reacting."
'It was a culture shock, but I anticipate being here for some time' - Bernard Abdelmalak, Renaissance Capital
From his office on the 46th floor of Moscow City's Naberezhnaya Tower, the banker Bernard Abdelmalak could be forgiven for thinking he was working in Canary Wharf.
The Russian capital's emerging business district, two miles west of the Kremlin on the banks of the Moscow river, is styled on Canary Wharf, although much of the vast development is still a building site.
Mr Abdelmalak, who left his job at Citigroup in London, his home town, a year ago, works for the Russian emerging markets bank Renaissance Capital, which recently shifted most of its workforce to the Presensky district of Moscow.
"Moving here has been a culture shock, and I miss my family and friends, but there is plenty of upside, such as this view and working for a dynamic investment bank in such a fascinating and fast-paced city," he said.
Remuneration is a large part of the upside for bankers trading places from London to Moscow. Mr Abdelmalak, 31, has benefited from a generous increase in salary coupled with a reduced tax rate of 13 per cent.
Renaissance is among a handful of financial institutions, such as Lehman Brothers, Citibank, Standard Bank, KPMG and VTB, that have recently opened offices. Mr Abdelmalak lives in the centre of the city and misses the hubbub of working near the busy commercial thoroughfare of Tverskaya, the city's main artery into Red Square. He said: "There are no shops, no restaurants, no bars, just one Starbucks and two industrial-size canteens, but that's what Canary Wharf was once like."
His position as head of equity product control involves looking after the bank's trades in Africa, as well as its bonds and repos operations. He regularly travels to Kiev, Lagos and Nairobi. Soon that is likely to include Amaty in Kazakhstan.
He is routinely working till 9pm on Mondays and Tuesdays before client and colleague socialising begins mid-week. He takes Russian language lessons two or three times a week. "Life is very different to London. I am out of my comfort zone."
Mr Abdelmalak is taking a long term-view. "If the market here holds as well as it has so far in the global credit crisis, I anticipate being here for some time yet," he said.
Jason Corcoran
Troika hires Citigroup equities head
Financial News
Jason Corcoran in Moscow
30 June 2008
Citigroup’s head of equities for central and eastern Europe, the Middle East and Africa is quitting to join Russia’s Troika Dialog in the latest defection from the investment bank.
Nick Harwood led Citigroup’s move into Turkey with the acquisition last year of local broker Opus Menkul Degerler and helped the bank set up offices this year in Kenya and Nigeria.
Harwood’s exit comes after the the bank’s co-head of global credit markets, Mark Watson, left to “pursue new opportunities”, and the departure to UBS of Dmitry Vinogradov, head of research, strategy and banking in Moscow.
It emerged last month that former Russia country head Stuart Harley quit the bank in February, while co-head of equity research Mikhail Seleznev and equity sales director Sergei Suverov left to join Deutsche Bank.
London-based Harwood, who is on gardening leave, arrives in Moscow in mid-September to take up a role as deputy head of global markets at Troika Dialog. He will be responsible for developing the bank’s product range, distribution for international clients and its move into new markets.
Citigroup is understood to be looking at internal candidates to replace Harwood.
www.efinancialnews.com
Jason Corcoran in Moscow
30 June 2008
Citigroup’s head of equities for central and eastern Europe, the Middle East and Africa is quitting to join Russia’s Troika Dialog in the latest defection from the investment bank.
Nick Harwood led Citigroup’s move into Turkey with the acquisition last year of local broker Opus Menkul Degerler and helped the bank set up offices this year in Kenya and Nigeria.
Harwood’s exit comes after the the bank’s co-head of global credit markets, Mark Watson, left to “pursue new opportunities”, and the departure to UBS of Dmitry Vinogradov, head of research, strategy and banking in Moscow.
It emerged last month that former Russia country head Stuart Harley quit the bank in February, while co-head of equity research Mikhail Seleznev and equity sales director Sergei Suverov left to join Deutsche Bank.
London-based Harwood, who is on gardening leave, arrives in Moscow in mid-September to take up a role as deputy head of global markets at Troika Dialog. He will be responsible for developing the bank’s product range, distribution for international clients and its move into new markets.
Citigroup is understood to be looking at internal candidates to replace Harwood.
www.efinancialnews.com
Tuesday, 24 June 2008
RenCap doubles employee levels
Financial News
Jason Corcoran in Moscow and Tara Loader Wilkinson
23 June 2008
Russian investment bank Renaissance Capital has more than doubled its workforce over the past 18 months and is still hiring, while many of its rivals have been cutting jobs to save costs.
Staff numbers at the bank, which specialises in emerging markets including Russia and sub-Saharan Africa, have grown from 500 at the start of last year to about 1,200 as of last week.
The bank said: “We have identified huge opportunities to create value in a range of frontier markets around the world, and that has led us to recruit talented people to pursue those opportunities and meet our aggressive targets. We have grown rapidly in the past year or two, against a backdrop of downsizing by many of our competitors.”
The bank is opening a distribution hub in Singapore and has hired Merrill Lynch’s former head of Asian equities, Martin Gillott, to run it. The operation will act as a distribution base for Renaissance Group products, focusing on institutional securities and international equity sales.
Renaissance, which was founded 13 years ago, joins Russian rivals Troika Dialog and VTB Bank in setting up operations in Singapore and trying to develop links with its investment institutions there.
The bank is also applying to Singapore’s regulator for a banking licence and may extend the office’s remit depending on demand.
Gillott, who joins Renaissance as managing director and head of distribution Asia, quit Merrill Lynch last year and returned to London.
The bank recently launched an operation in Dubai for the roll-out and development of investment banking and asset gathering activities in the Middle East. It also has distribution hubs in London and New York.
Renaissance last week advertised to hire directors, vice-presidents, associates and senior analysts in investment banking, for positions based in Moscow and Kiev, in Almaty, Kazakhstan, and in Lagos, Nigeria.
Renaissance declined to say how many staff it was looking to hire.
Jason Corcoran in Moscow and Tara Loader Wilkinson
23 June 2008
Russian investment bank Renaissance Capital has more than doubled its workforce over the past 18 months and is still hiring, while many of its rivals have been cutting jobs to save costs.
Staff numbers at the bank, which specialises in emerging markets including Russia and sub-Saharan Africa, have grown from 500 at the start of last year to about 1,200 as of last week.
The bank said: “We have identified huge opportunities to create value in a range of frontier markets around the world, and that has led us to recruit talented people to pursue those opportunities and meet our aggressive targets. We have grown rapidly in the past year or two, against a backdrop of downsizing by many of our competitors.”
The bank is opening a distribution hub in Singapore and has hired Merrill Lynch’s former head of Asian equities, Martin Gillott, to run it. The operation will act as a distribution base for Renaissance Group products, focusing on institutional securities and international equity sales.
Renaissance, which was founded 13 years ago, joins Russian rivals Troika Dialog and VTB Bank in setting up operations in Singapore and trying to develop links with its investment institutions there.
The bank is also applying to Singapore’s regulator for a banking licence and may extend the office’s remit depending on demand.
Gillott, who joins Renaissance as managing director and head of distribution Asia, quit Merrill Lynch last year and returned to London.
The bank recently launched an operation in Dubai for the roll-out and development of investment banking and asset gathering activities in the Middle East. It also has distribution hubs in London and New York.
Renaissance last week advertised to hire directors, vice-presidents, associates and senior analysts in investment banking, for positions based in Moscow and Kiev, in Almaty, Kazakhstan, and in Lagos, Nigeria.
Renaissance declined to say how many staff it was looking to hire.
Wednesday, 18 June 2008
Russian banks caught in talent war
Financial News
Jason Corcoran in Moscow
16 June 2008
A dwindling stock of investment bankers and growing demand for talent is driving the latest hiring merry-go-round in Russia’s capital markets.
Competition between bulge brackets and domestic banks has been exacerbated by Russia’s VTB moving into investment banking. The state-controlled bank has hired 60 bankers from Deutsche Bank and the German institution has in turn responded by hiring analysts and bankers from US and European banking rivals in Moscow, including Citigroup, UniCredit, UBS and ING.
Dmitry Vinogradov, head of research, strategy and banking at Citigroup in Moscow, has moved to UBS and co-head of equity research Mikhail Selezenev and equity sales director Sergei Suverov have left to join Deutsche Bank.
This follows the departure in February of Citigroup’s former Russia country head Stuart Harley, who set up the bank’s Russian business in 2004 and is on a sabbatical. He was asked to relocate full-time to Moscow from London last year but declined.
Nick Harwood, head of equities for central and eastern Europe, the Middle East and Africa at Citigroup, said the bank had increased its Moscow staff despite a number of defections.
It has hired John Heisel as an equity sales trader, Elina Ribakova as an economist, oil analyst Ildar Khaziev and Konstantin Korotich as chief administrative officer of Russian equities.
A Citigroup spokesman said: “Russia remains our biggest equities business in Ceema which we will continue to invest in. Prospects for the remainder of the year look good with a strong equity capital markets pipeline in particular.”
Italian banking group UniCredit, which acquired Russian brokerage Aton 18 months ago, has hired an executive director from Goldman Sachs to co-head its investment banking business with Alexander Kandel. Amiran Kanchaveli previously worked at ABN AMRO alongside the Prime Minister of Georgia, Vladimir Gurgenidze.
UniCredit is shaking up its Moscow business following its acquisition of Aton. A senior source said half of the bankers from its debt and credit team would be let go and 20 middle and back-office staff would be cut.
Russia’s capital markets have been largely insulated from the global credit crunch. A total of 306 M&A deals worth $51.3bn have been conducted this year, according to data provider Thomson Reuters. That represented an increase on the same period last year when 301 deals worth $46bn were conducted.
M&A has filled the void left by ECM, where just seven deals worth $2.23bn occurred in the first half of this year compared to 20 deals worth $22bn last year.
In debt capital markets, there were 23 issues worth $11.4bn in the first six months compared to 49 issues worth $22.5bn last year.
Russian investment funds have also benefited from the turmoil in developed markets. Russian funds have this year reported inflows of $2.7bn.
UralSib chief strategist Chris Weafer said: “Along with the $1bn invested through December last year, the total amount invested in Russia since the start of the election cycle on December 2 is $3.7bn. That compares with only $300m taken into these funds through the first 11 months of last year.”
Jason Corcoran in Moscow
16 June 2008
A dwindling stock of investment bankers and growing demand for talent is driving the latest hiring merry-go-round in Russia’s capital markets.
Competition between bulge brackets and domestic banks has been exacerbated by Russia’s VTB moving into investment banking. The state-controlled bank has hired 60 bankers from Deutsche Bank and the German institution has in turn responded by hiring analysts and bankers from US and European banking rivals in Moscow, including Citigroup, UniCredit, UBS and ING.
Dmitry Vinogradov, head of research, strategy and banking at Citigroup in Moscow, has moved to UBS and co-head of equity research Mikhail Selezenev and equity sales director Sergei Suverov have left to join Deutsche Bank.
This follows the departure in February of Citigroup’s former Russia country head Stuart Harley, who set up the bank’s Russian business in 2004 and is on a sabbatical. He was asked to relocate full-time to Moscow from London last year but declined.
Nick Harwood, head of equities for central and eastern Europe, the Middle East and Africa at Citigroup, said the bank had increased its Moscow staff despite a number of defections.
It has hired John Heisel as an equity sales trader, Elina Ribakova as an economist, oil analyst Ildar Khaziev and Konstantin Korotich as chief administrative officer of Russian equities.
A Citigroup spokesman said: “Russia remains our biggest equities business in Ceema which we will continue to invest in. Prospects for the remainder of the year look good with a strong equity capital markets pipeline in particular.”
Italian banking group UniCredit, which acquired Russian brokerage Aton 18 months ago, has hired an executive director from Goldman Sachs to co-head its investment banking business with Alexander Kandel. Amiran Kanchaveli previously worked at ABN AMRO alongside the Prime Minister of Georgia, Vladimir Gurgenidze.
UniCredit is shaking up its Moscow business following its acquisition of Aton. A senior source said half of the bankers from its debt and credit team would be let go and 20 middle and back-office staff would be cut.
Russia’s capital markets have been largely insulated from the global credit crunch. A total of 306 M&A deals worth $51.3bn have been conducted this year, according to data provider Thomson Reuters. That represented an increase on the same period last year when 301 deals worth $46bn were conducted.
M&A has filled the void left by ECM, where just seven deals worth $2.23bn occurred in the first half of this year compared to 20 deals worth $22bn last year.
In debt capital markets, there were 23 issues worth $11.4bn in the first six months compared to 49 issues worth $22.5bn last year.
Russian investment funds have also benefited from the turmoil in developed markets. Russian funds have this year reported inflows of $2.7bn.
UralSib chief strategist Chris Weafer said: “Along with the $1bn invested through December last year, the total amount invested in Russia since the start of the election cycle on December 2 is $3.7bn. That compares with only $300m taken into these funds through the first 11 months of last year.”
Tuesday, 10 June 2008
VTB recruits 20 for sovereign wealth unit
Financial News
Jason Corcoran in Moscow
09 June 2008
Russian state-controlled bank VTB has created a dedicated unit of 20 bankers to act as a conduit for sovereign wealth funds looking to tap the global capital markets.
Ivan Ivanchenko, who has joined VTB from Deutsche Bank’s global markets team, is in charge of building the operation and developing links to sovereign wealth funds in the Middle East and Asia.
The operation is expected to be involved in managing a large amount of Russia’s $32.6bn (€21bn) National Prosperity Fund, which is scheduled to begin investing in foreign stocks and corporate bonds from October.
Ivanchenko said: “The sovereign funds and their counterparties are considering big allocations to Russian corporations. So far, we have 20 staff involved from sales and trading, research and global markets but it is a floating number and in the set-up stage.”
Sovereign wealth funds hold $2 trillion in assets globally, and are forecast to grow sixfold by 2015.
Goldman Sachs and Morgan Stanley have moved staff to the Middle East to target funds based in the region.
Barclays Capital named Gay Huey Evans, formerly a top banker in Citigroup’s alternative investments division, to a new post in March covering sovereign wealth funds.
Ivanchenko said Temasek, Singapore’s $100bn sovereign wealth fund, is closing in on investments in Russian energy and the infrastructure sectors.
While on a business trip to Singapore, he said: “Temasek’s previous experience of investing in Russian IPOs was mixed and they want to outsource investments to firms that can manage PR and overcome any local difficulties and prejudices that might exist.”
VTB is establishing investment banking hubs in Moscow, London, and Singapore and has recently recruited 60 bankers from Deutsche Bank.
It has hired Timofey Demchenko from Deutsche Bank to run its private equity and special situations department, along with Dmitry Skryabin as head of energy and utilities research from Aton Capital, the Russian banking business of Italy’s UniCredit.
Russian Finance Minister Alexei Kudrin has backed VTB’s bid to manage the National Prosperity Fund, which was spun off from its main oil stabilisation fund in January.
www.efinancialnews.com
Jason Corcoran in Moscow
09 June 2008
Russian state-controlled bank VTB has created a dedicated unit of 20 bankers to act as a conduit for sovereign wealth funds looking to tap the global capital markets.
Ivan Ivanchenko, who has joined VTB from Deutsche Bank’s global markets team, is in charge of building the operation and developing links to sovereign wealth funds in the Middle East and Asia.
The operation is expected to be involved in managing a large amount of Russia’s $32.6bn (€21bn) National Prosperity Fund, which is scheduled to begin investing in foreign stocks and corporate bonds from October.
Ivanchenko said: “The sovereign funds and their counterparties are considering big allocations to Russian corporations. So far, we have 20 staff involved from sales and trading, research and global markets but it is a floating number and in the set-up stage.”
Sovereign wealth funds hold $2 trillion in assets globally, and are forecast to grow sixfold by 2015.
Goldman Sachs and Morgan Stanley have moved staff to the Middle East to target funds based in the region.
Barclays Capital named Gay Huey Evans, formerly a top banker in Citigroup’s alternative investments division, to a new post in March covering sovereign wealth funds.
Ivanchenko said Temasek, Singapore’s $100bn sovereign wealth fund, is closing in on investments in Russian energy and the infrastructure sectors.
While on a business trip to Singapore, he said: “Temasek’s previous experience of investing in Russian IPOs was mixed and they want to outsource investments to firms that can manage PR and overcome any local difficulties and prejudices that might exist.”
VTB is establishing investment banking hubs in Moscow, London, and Singapore and has recently recruited 60 bankers from Deutsche Bank.
It has hired Timofey Demchenko from Deutsche Bank to run its private equity and special situations department, along with Dmitry Skryabin as head of energy and utilities research from Aton Capital, the Russian banking business of Italy’s UniCredit.
Russian Finance Minister Alexei Kudrin has backed VTB’s bid to manage the National Prosperity Fund, which was spun off from its main oil stabilisation fund in January.
www.efinancialnews.com
Monday, 26 May 2008
Deutsche begins Russian fightback with Moscow hires
Financial News
Harry Wilson and Jason Corcoran in Moscow
20 May 2008 updated 20 May 2008 at 08:32 GMT
Deutsche Bank has made 15 hires, promotions and internal transfers to its Russian business as it moves to repair the damage to its Moscow office wrought by a wave of senior departures in recent months.
The German bank has hired 11 staff to fill gaps left in its investment banking business by the departure of several bankers to state-owned rival VTB, including five for its Moscow-based equity research business.
The hires come just months before a change of senior management in Deutsche Bank’s Moscow office, with Igor Lojevsky, formerly head of Dresdner Kleinwort’s Russian business, joining the bank to replace Charlie Ryan as chief country officer.
Deutsche today confirmed Ryan is set to give up his day-to-day duties at the bank and become chairman of the operation when Lojevsky joins the business in late August. Financial News first reported the news yesterday.
Mikhail Seleznev has been hired from Citigroup as co-head of equity research along with Jaroslov Lissovolik. Seleznev was previously a metals and mining analyst at Citigroup, while Lissovolik was already a senior analyst in Deutsche Bank’s Moscow office.
The bank has made four other hires for the research business, with Tatiana Kopoustina joining from Aton Capital, the Russian business of Italy’s UniCredit, to cover the oil and gas industry; Bob Kommers from UBS to cover industrials and banking; Igor Semenov from ING to cover telecoms; and Brady Martin from Moscow-based broker Alfa Bank to cover retailers.
Dalinc Ariburnu, global head of emerging markets in Deutsche Bank’s global market business, said: “The Deutsche Bank business in Moscow is one of our most important emerging markets franchises, and having lost quite a few staff recently we wanted to move quickly to fill the gaps left.”
Pavel Dimitriev head of debt capital markets at Dresdner Kleinwort in Russia has been hired to head Deutsche Bank’s corporate coverage business in Russia and will be responsible for the bank’s global markets marketing operation in the country.
Deutsche Bank has also promoted its head of corporate equity derivatives trading for Russia and the CIS, Batubay Ozkan, to head of debt trading for the region, as well as hiring Alex Ponomorenko, from a Los Angeles-based private equity firm to run its illiquid credit, private equity and real estate trading business.
Tim Wiswell and Jack Busta have been appointed to run equity sales and trading in Moscow. Busta was a senior derivatives trader in Deutsche Bank’s London office and will oversee equity derivatives trading in Russia, while Wiswell was a senior salesman in Moscow for the bank.
Additionally, David Johnson has joined the equity sales trading desk from Alfa Bank, while Sergei Suverov has joined the domestic equity sales team from Citigroup.
Alexey Bolshakov and Patrick Vebel join the general Russian equity sales team from DWS and Deutsche Asset Management respectively. Yassine Rhalib, a derivatives structuring banker in London, transfers to Moscow to cover derivatives sales to corporates.
The hires will not be the last Deutsche Bank makes for its Russian business and the bank said it will add more staff in its Moscow office soon as it continues the process of filling jobs left by departed staff.
Ariburnu said: “We have been carefully choosing who we want to hire and expect to announce more appointments over the next couple of weeks.”
www.efinancialnews.com
Harry Wilson and Jason Corcoran in Moscow
20 May 2008 updated 20 May 2008 at 08:32 GMT
Deutsche Bank has made 15 hires, promotions and internal transfers to its Russian business as it moves to repair the damage to its Moscow office wrought by a wave of senior departures in recent months.
The German bank has hired 11 staff to fill gaps left in its investment banking business by the departure of several bankers to state-owned rival VTB, including five for its Moscow-based equity research business.
The hires come just months before a change of senior management in Deutsche Bank’s Moscow office, with Igor Lojevsky, formerly head of Dresdner Kleinwort’s Russian business, joining the bank to replace Charlie Ryan as chief country officer.
Deutsche today confirmed Ryan is set to give up his day-to-day duties at the bank and become chairman of the operation when Lojevsky joins the business in late August. Financial News first reported the news yesterday.
Mikhail Seleznev has been hired from Citigroup as co-head of equity research along with Jaroslov Lissovolik. Seleznev was previously a metals and mining analyst at Citigroup, while Lissovolik was already a senior analyst in Deutsche Bank’s Moscow office.
The bank has made four other hires for the research business, with Tatiana Kopoustina joining from Aton Capital, the Russian business of Italy’s UniCredit, to cover the oil and gas industry; Bob Kommers from UBS to cover industrials and banking; Igor Semenov from ING to cover telecoms; and Brady Martin from Moscow-based broker Alfa Bank to cover retailers.
Dalinc Ariburnu, global head of emerging markets in Deutsche Bank’s global market business, said: “The Deutsche Bank business in Moscow is one of our most important emerging markets franchises, and having lost quite a few staff recently we wanted to move quickly to fill the gaps left.”
Pavel Dimitriev head of debt capital markets at Dresdner Kleinwort in Russia has been hired to head Deutsche Bank’s corporate coverage business in Russia and will be responsible for the bank’s global markets marketing operation in the country.
Deutsche Bank has also promoted its head of corporate equity derivatives trading for Russia and the CIS, Batubay Ozkan, to head of debt trading for the region, as well as hiring Alex Ponomorenko, from a Los Angeles-based private equity firm to run its illiquid credit, private equity and real estate trading business.
Tim Wiswell and Jack Busta have been appointed to run equity sales and trading in Moscow. Busta was a senior derivatives trader in Deutsche Bank’s London office and will oversee equity derivatives trading in Russia, while Wiswell was a senior salesman in Moscow for the bank.
Additionally, David Johnson has joined the equity sales trading desk from Alfa Bank, while Sergei Suverov has joined the domestic equity sales team from Citigroup.
Alexey Bolshakov and Patrick Vebel join the general Russian equity sales team from DWS and Deutsche Asset Management respectively. Yassine Rhalib, a derivatives structuring banker in London, transfers to Moscow to cover derivatives sales to corporates.
The hires will not be the last Deutsche Bank makes for its Russian business and the bank said it will add more staff in its Moscow office soon as it continues the process of filling jobs left by departed staff.
Ariburnu said: “We have been carefully choosing who we want to hire and expect to announce more appointments over the next couple of weeks.”
www.efinancialnews.com
Sunday, 20 April 2008
VTB stages fresh Russian raid on Deutsche Bank
Financial News
Jason Corcoran in Moscow
16 April 2008
Russia's second largest lender, VTB, has poached 10 bankers from Deutsche Bank in Russia in its second raid on the German institution's Moscow operation.
The bank, which is setting up its own investment banking arm in Moscow, London and Singapore, has recruited personnel for management roles and positions in fixed income, equity sales and research. VTB confirmed the hires, while Deutsche confirmed the departures.
Investment banking sources said Deutsche has been "fighting tooth and nail" to retain staff and had been successful in keeping some people who were believed to have been offered jobs by VTB. Bankers in Moscow suggested as many as 40 bankers were leaving.
"What's actually quite impressive is that Deutsche have fought back and have retained people but VTB virtually has a blank cheque book and they couldn't prevent a number going," said a banker.
Andrey Girichev, head of equity trading for Russia/CIS at Deutsche, joins VTB in Moscow as co-leader of its new equity sales operation.
Nikolai Donzov will become chief operating officer and Svetlana Fedorenko financial director.
Vitaly Buzoverya has been appointed as the co-leader of the department of commercial operations for fixed income products. He will be responsible for the activity on the global markets for capital in Russia and the CIS, including trade in currencies, interest rates, derivative tools, bonds and structured financing. Aleksey Ivanov has been hired as his deputy.
Alexey Yakovitsky, previously hired from Deutsche, has been named as head of research. His team includes three of his former colleagues.
Alexandr Pukhaev will head the analysis of the industrial sector of metallurgy and ore extraction. Dmitry Dmitriev will head the financial and fixed income sector.
Elena Sakhnova will head the coverage of the transport sector, machine building, chemical and construction sectors.
Also arriving from Deutsche are Ekaterina Barinova as director of human resources and Alexey Emilyanov as director of IT.
The resignations are the latest to hit Deutsche Bank. Last month it suffered high-profile resignations after deputy head of its Russian business, Yuri Soloviev, left for to state-owned VTB, along with Victor Makshantsev, head of real estate and infrastructure and Alexei Zabotkin, its chief strategist and Yakovitsky, its head of research.
Financial News revealed that Charlie Ryan, chief executive of Deutsche Bank in Russia and a co-founder of UFG, Deutsche Bank's Russian business, could also join the exodus when his contract expires in the autumn. Discussions on renewing his employment with the business are yet to get underway.
Ryan was one of the co-founders of UFG along with former Russian finance minister Boris Fedorov and Ilya Sherbovich, Deutsche's former head of investment banking in Russia, who left last year to found his own Moscow-based advisory and investment boutique.
Deutsche this month hired Alexander Pugovkin from Renaissance Capital as international sale trader and Sergey Suverov as senior equity sales director from Citibank.
A spokeswoman for VTB said it had so far hired 15 bankers from Deutsche.
Jason Corcoran in Moscow
16 April 2008
Russia's second largest lender, VTB, has poached 10 bankers from Deutsche Bank in Russia in its second raid on the German institution's Moscow operation.
The bank, which is setting up its own investment banking arm in Moscow, London and Singapore, has recruited personnel for management roles and positions in fixed income, equity sales and research. VTB confirmed the hires, while Deutsche confirmed the departures.
Investment banking sources said Deutsche has been "fighting tooth and nail" to retain staff and had been successful in keeping some people who were believed to have been offered jobs by VTB. Bankers in Moscow suggested as many as 40 bankers were leaving.
"What's actually quite impressive is that Deutsche have fought back and have retained people but VTB virtually has a blank cheque book and they couldn't prevent a number going," said a banker.
Andrey Girichev, head of equity trading for Russia/CIS at Deutsche, joins VTB in Moscow as co-leader of its new equity sales operation.
Nikolai Donzov will become chief operating officer and Svetlana Fedorenko financial director.
Vitaly Buzoverya has been appointed as the co-leader of the department of commercial operations for fixed income products. He will be responsible for the activity on the global markets for capital in Russia and the CIS, including trade in currencies, interest rates, derivative tools, bonds and structured financing. Aleksey Ivanov has been hired as his deputy.
Alexey Yakovitsky, previously hired from Deutsche, has been named as head of research. His team includes three of his former colleagues.
Alexandr Pukhaev will head the analysis of the industrial sector of metallurgy and ore extraction. Dmitry Dmitriev will head the financial and fixed income sector.
Elena Sakhnova will head the coverage of the transport sector, machine building, chemical and construction sectors.
Also arriving from Deutsche are Ekaterina Barinova as director of human resources and Alexey Emilyanov as director of IT.
The resignations are the latest to hit Deutsche Bank. Last month it suffered high-profile resignations after deputy head of its Russian business, Yuri Soloviev, left for to state-owned VTB, along with Victor Makshantsev, head of real estate and infrastructure and Alexei Zabotkin, its chief strategist and Yakovitsky, its head of research.
Financial News revealed that Charlie Ryan, chief executive of Deutsche Bank in Russia and a co-founder of UFG, Deutsche Bank's Russian business, could also join the exodus when his contract expires in the autumn. Discussions on renewing his employment with the business are yet to get underway.
Ryan was one of the co-founders of UFG along with former Russian finance minister Boris Fedorov and Ilya Sherbovich, Deutsche's former head of investment banking in Russia, who left last year to found his own Moscow-based advisory and investment boutique.
Deutsche this month hired Alexander Pugovkin from Renaissance Capital as international sale trader and Sergey Suverov as senior equity sales director from Citibank.
A spokeswoman for VTB said it had so far hired 15 bankers from Deutsche.
Tuesday, 18 March 2008
Russian bank hires in Europe and Asia
Financial News
Jason Corcoran in Moscow
10 March 2008
Russian state-controlled bank VTB has hired senior western bankers before the launch of its subsidiary’s full investment banking services.
Nick Reilly, former global head of global operations in investment banking at Deutsche Bank, has joined as chief operating officer of VTB Europe and Peter Cardosa has joined as managing director of VTB Singapore from Deutsche's Asian business.
The board of directors has also been bolstered by former diplomat Anthony Loehnis and former Citigroup banker Julian Simmonds as non-executives.
Loehnis, who served in Moscow as a diplomat, is a former executive director of the Bank of England and a former vice-chairman of SG Warburg’s investment banking division. Simmonds was global head of foreign exchange and structured products businesses at Citigroup until retiring in 2005.
VTB is closing in on a high-profile appointment for the chief executive role of VTB Europe, the London-based investment banking business. The bank established its London office late in 2006 and received authorisation from UK regulators last year.
The business, with the working name of “Investment Banking 21st Century”, will have two main hubs in London and Moscow, along with staff in Singapore.
A spokeswoman for VTB said its growing London personnel were expecting to move into new offices on 14 Cornhill in September or October. The 6,360sq m space is double that of its King William Street offices and is sufficient for a trading floor.
Jason Corcoran in Moscow
10 March 2008
Russian state-controlled bank VTB has hired senior western bankers before the launch of its subsidiary’s full investment banking services.
Nick Reilly, former global head of global operations in investment banking at Deutsche Bank, has joined as chief operating officer of VTB Europe and Peter Cardosa has joined as managing director of VTB Singapore from Deutsche's Asian business.
The board of directors has also been bolstered by former diplomat Anthony Loehnis and former Citigroup banker Julian Simmonds as non-executives.
Loehnis, who served in Moscow as a diplomat, is a former executive director of the Bank of England and a former vice-chairman of SG Warburg’s investment banking division. Simmonds was global head of foreign exchange and structured products businesses at Citigroup until retiring in 2005.
VTB is closing in on a high-profile appointment for the chief executive role of VTB Europe, the London-based investment banking business. The bank established its London office late in 2006 and received authorisation from UK regulators last year.
The business, with the working name of “Investment Banking 21st Century”, will have two main hubs in London and Moscow, along with staff in Singapore.
A spokeswoman for VTB said its growing London personnel were expecting to move into new offices on 14 Cornhill in September or October. The 6,360sq m space is double that of its King William Street offices and is sufficient for a trading floor.
Wednesday, 6 February 2008
Investors scramble for infrastructure
Financial News
Jason Corcoran
04 February 2008
Top 10 infrastructure firms since 2003
Private equity’s participation in infrastructure has broadened the attractiveness of the asset class but has increased competition. The credit squeeze has led to a cut in returns.
Private equity firms short on big buyout targets are challenging infrastructure specialists such as Australia’s Macquarie and Babcock and Brown and investment banks including Goldman Sachs, Morgan Stanley and Credit Suisse.
Buyout groups raised 19 infrastructure funds worth $29.9bn (€20.5bn) last year, almost double that raised in 2006, according to UK research boutique Private Equity Intelligence. Its research showed there were 42 infrastructure funds targeting about $46bn.
CVC Capital Partners is the latest private equity group to launch an infrastructure fund, joining the pool of money dedicated to the sector. The UK-headquartered firm announced plans in December to raise $2bn for an infrastructure fund to buy utilities and public services.
US group Carlyle raised $1.2bn in November for its first infrastructure fund focused on North America where it believes public-private partnerships are set to take off.
AIG Highstar, a New York-based private equity group, closed its latest infrastructure fund in October at $3.5bn. Accountancy firm Ernst & Young said smaller private equity funds were looking to fund infrastructure projects valued at between $300m and $500m, smaller than big funds expect to tackle.
Tom Leman, a partner specialising in private equity at law firm Pinsent Masons, said: “Returns are about managing expectations in the infrastructure matrix. Classic infrastructure funds seek 9%-10% returns over 25 years. If inflation rates are about 4%, this is a great result. If private equity succeeds one out of 10 times, they are rightly looking for 20% margins.”
Infrastructure specialists are paying more for assets because they are seeking more stable and longer-term returns. Buyout funds seek higher returns and flip the asset after two or three years.
Investment banks have piled into infrastructure and industry specialists say their approach sits between buyout funds and specialists. Leman said: “Banks invest off their balance sheet and they can be flexible because no investors are knocking on their door demanding their cash back. Some buy and flip but generally they are more long term than buyouts.”
Jane Welsh, consultant at investment consultancy Watson Wyatt, advises her clients about investment opportunities and returns on infrastructure’s risk scale.
She said: “Specialists are more modest with low double-digit targets. Private equity funds and banks are targeting higher margins and will do messier transactions and will look at business bolt-ons such as services. There are also funds specialising in greenfield projects, which take on bid risk and usage risk.”
Investors new to the asset class regard it as a natural successor to commercial real estate – physical, real, tangible assets generating cashflows. Others view mature infrastructure as a substitute for long-term bonds with a hedge against inflation. The remainder regard infrastructure as a private equity play, with the focus on refinancing and restructuring a business to make capital gains.
Asieh Mansour, chief economist at Deutsche Bank Rreef Alternatives, regards infrastructure as a hybrid asset class, which shares common characteristics with traditional and alternative assets.
He said: “The bond-like, equity-like or real estate-like feature of any infrastructure investment depends on the individual asset and the stage of the asset’s maturity. Depending on the specific sub-sector and stage of development, infrastructure investments may range from a low-risk fixed-income substitute to a higher-risk, more volatile private equity-type investment.”
Charles Berkeley, managing director, financial sponsors, at RBC Capital Markets, believes each type of investor has its advantage.
He said: “The direct investor has less fee drag, while investment banking-sponsored funds are sometimes better able to use their global networks to originate deals. As in any market, innovators have a natural advantage and competitive access to capital.”
Buyout firms such as Carlyle and UK-listed 3i are changing tack to take advantage of opportunities in public-private partnerships. 3i has the best-known private equity fund in the sector. Despite its lacklustre start, its float was the largest listed infrastructure fund launch in Europe, according to the group. A big backer was the BT Pension Fund, which took a £98m (€131m) stake.
Consultants suggested the fund’s concentration on PPP contracts might lead to slow and steady returns, which pension funds favour. Although the lines are blurring, Leman believes buyouts will not change by adopting all the characteristics of infrastructure specialists.
He said: “Valuations are getting closer between the different camps but private equity funds have an edge. If you are trying to get management to run the assets, buyouts have the advantage because staff can realise capital gains in an exit within two to three years.”
Danny Latham, head of European infrastructure investment at Australian investment manager Colonial First State, agrees and does not envisage buyout funds providing 10-year covenants to satisfy public utility regulators.
He said: “Infrastructure specialists have a buy-and-hold strategy, whereas private equity has a buy-and-clip strategy. The issue is to ask about the attitude of vendors, who typically are not overly enamoured with the private equity industry. There might be a push towards more hybrid deals, such as UK service station operator Welcome Break. United Utilities is also pulling back to core utilities and is to sell its service businesses.”
With the raising of new funds and competition intensifying, the traditional definition of infrastructure has been extended to assets that have similar characteristics and returns, such as waste management and car parks.
Leman said: “Now racier opportunities are scarcer, private equity funds are having to look at service stations and domiciliary care businesses. They much prefer services and don’t want to be left holding the baby.”
Consultants also expect infrastructure funds to look around the world for opportunities, including in non-Organisation for Economic Co-operation and Development countries. CVC is examining sub-Saharan Africa for a new fund and the infrastructure joint venture between Macquarie and Renaissance Capital is understood to be launching a Russia and Commonwealth of Independent States fund this month.
• The volume of infrastructure financing this year is likely to continue at last year’s pace, says a report by rating agency Standard & Poor’s.
Last year was another bumper year for global infrastructure finance, fuelled by record levels of M&A activity driven by asset-hungry funds.
Infrastructure-related deals worldwide last year were worth $322bn (€216bn), just shy of the $342bn spent in 2006, according to S&P.
However, the agency warned infrastructure might not be a safe haven in a global recession. In a volatile market, bankers and investors might have expected infrastructure to remain a safe asset class and offer stable returns with little risk. But S&P said bank lenders and institutional investors had traded favourable debt terms against the management of credit risk during the infrastructure finance boom.
With the cycle turning in global credit markets, these loosely structured and highly leveraged acquisition loans are looking less attractive.
S&P estimated that up to $34bn of leveraged infrastructure loans could be left paralysed under present market conditions.
It highlighted the combination of project finance structuring techniques with the slacker covenants prevalent in leveraged finance. This new form of acquisition hybrid lending has allowed sponsors to acquire assets at record-breaking debt multiples but has dragged down credit quality in the infrastructure sector.
Jason Corcoran
04 February 2008
Top 10 infrastructure firms since 2003
Private equity’s participation in infrastructure has broadened the attractiveness of the asset class but has increased competition. The credit squeeze has led to a cut in returns.
Private equity firms short on big buyout targets are challenging infrastructure specialists such as Australia’s Macquarie and Babcock and Brown and investment banks including Goldman Sachs, Morgan Stanley and Credit Suisse.
Buyout groups raised 19 infrastructure funds worth $29.9bn (€20.5bn) last year, almost double that raised in 2006, according to UK research boutique Private Equity Intelligence. Its research showed there were 42 infrastructure funds targeting about $46bn.
CVC Capital Partners is the latest private equity group to launch an infrastructure fund, joining the pool of money dedicated to the sector. The UK-headquartered firm announced plans in December to raise $2bn for an infrastructure fund to buy utilities and public services.
US group Carlyle raised $1.2bn in November for its first infrastructure fund focused on North America where it believes public-private partnerships are set to take off.
AIG Highstar, a New York-based private equity group, closed its latest infrastructure fund in October at $3.5bn. Accountancy firm Ernst & Young said smaller private equity funds were looking to fund infrastructure projects valued at between $300m and $500m, smaller than big funds expect to tackle.
Tom Leman, a partner specialising in private equity at law firm Pinsent Masons, said: “Returns are about managing expectations in the infrastructure matrix. Classic infrastructure funds seek 9%-10% returns over 25 years. If inflation rates are about 4%, this is a great result. If private equity succeeds one out of 10 times, they are rightly looking for 20% margins.”
Infrastructure specialists are paying more for assets because they are seeking more stable and longer-term returns. Buyout funds seek higher returns and flip the asset after two or three years.
Investment banks have piled into infrastructure and industry specialists say their approach sits between buyout funds and specialists. Leman said: “Banks invest off their balance sheet and they can be flexible because no investors are knocking on their door demanding their cash back. Some buy and flip but generally they are more long term than buyouts.”
Jane Welsh, consultant at investment consultancy Watson Wyatt, advises her clients about investment opportunities and returns on infrastructure’s risk scale.
She said: “Specialists are more modest with low double-digit targets. Private equity funds and banks are targeting higher margins and will do messier transactions and will look at business bolt-ons such as services. There are also funds specialising in greenfield projects, which take on bid risk and usage risk.”
Investors new to the asset class regard it as a natural successor to commercial real estate – physical, real, tangible assets generating cashflows. Others view mature infrastructure as a substitute for long-term bonds with a hedge against inflation. The remainder regard infrastructure as a private equity play, with the focus on refinancing and restructuring a business to make capital gains.
Asieh Mansour, chief economist at Deutsche Bank Rreef Alternatives, regards infrastructure as a hybrid asset class, which shares common characteristics with traditional and alternative assets.
He said: “The bond-like, equity-like or real estate-like feature of any infrastructure investment depends on the individual asset and the stage of the asset’s maturity. Depending on the specific sub-sector and stage of development, infrastructure investments may range from a low-risk fixed-income substitute to a higher-risk, more volatile private equity-type investment.”
Charles Berkeley, managing director, financial sponsors, at RBC Capital Markets, believes each type of investor has its advantage.
He said: “The direct investor has less fee drag, while investment banking-sponsored funds are sometimes better able to use their global networks to originate deals. As in any market, innovators have a natural advantage and competitive access to capital.”
Buyout firms such as Carlyle and UK-listed 3i are changing tack to take advantage of opportunities in public-private partnerships. 3i has the best-known private equity fund in the sector. Despite its lacklustre start, its float was the largest listed infrastructure fund launch in Europe, according to the group. A big backer was the BT Pension Fund, which took a £98m (€131m) stake.
Consultants suggested the fund’s concentration on PPP contracts might lead to slow and steady returns, which pension funds favour. Although the lines are blurring, Leman believes buyouts will not change by adopting all the characteristics of infrastructure specialists.
He said: “Valuations are getting closer between the different camps but private equity funds have an edge. If you are trying to get management to run the assets, buyouts have the advantage because staff can realise capital gains in an exit within two to three years.”
Danny Latham, head of European infrastructure investment at Australian investment manager Colonial First State, agrees and does not envisage buyout funds providing 10-year covenants to satisfy public utility regulators.
He said: “Infrastructure specialists have a buy-and-hold strategy, whereas private equity has a buy-and-clip strategy. The issue is to ask about the attitude of vendors, who typically are not overly enamoured with the private equity industry. There might be a push towards more hybrid deals, such as UK service station operator Welcome Break. United Utilities is also pulling back to core utilities and is to sell its service businesses.”
With the raising of new funds and competition intensifying, the traditional definition of infrastructure has been extended to assets that have similar characteristics and returns, such as waste management and car parks.
Leman said: “Now racier opportunities are scarcer, private equity funds are having to look at service stations and domiciliary care businesses. They much prefer services and don’t want to be left holding the baby.”
Consultants also expect infrastructure funds to look around the world for opportunities, including in non-Organisation for Economic Co-operation and Development countries. CVC is examining sub-Saharan Africa for a new fund and the infrastructure joint venture between Macquarie and Renaissance Capital is understood to be launching a Russia and Commonwealth of Independent States fund this month.
• The volume of infrastructure financing this year is likely to continue at last year’s pace, says a report by rating agency Standard & Poor’s.
Last year was another bumper year for global infrastructure finance, fuelled by record levels of M&A activity driven by asset-hungry funds.
Infrastructure-related deals worldwide last year were worth $322bn (€216bn), just shy of the $342bn spent in 2006, according to S&P.
However, the agency warned infrastructure might not be a safe haven in a global recession. In a volatile market, bankers and investors might have expected infrastructure to remain a safe asset class and offer stable returns with little risk. But S&P said bank lenders and institutional investors had traded favourable debt terms against the management of credit risk during the infrastructure finance boom.
With the cycle turning in global credit markets, these loosely structured and highly leveraged acquisition loans are looking less attractive.
S&P estimated that up to $34bn of leveraged infrastructure loans could be left paralysed under present market conditions.
It highlighted the combination of project finance structuring techniques with the slacker covenants prevalent in leveraged finance. This new form of acquisition hybrid lending has allowed sponsors to acquire assets at record-breaking debt multiples but has dragged down credit quality in the infrastructure sector.
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