Financial News
March 24, 2008
Jason Corcoran in Moscow
Russian banking group Renaissance Capital had hired former chairman of the US Securities and Exchange Commission William Donaldson as a senior adviser.
Donaldson, who stepped down from the SEC in July 2005, has been brought on board to build links between the investment bank and Wall Street.
The former co-founder, chairman and chief executive of US investment banking firm Donaldson, Lufkin & Jenrette, served just over two years following his appointment by his friend President George Bush in April 2003.
Donaldson, the 27th chairman at the SEC, retired after
drawing sharp criticism over the Sarbanes-Oxley legislation, which is designed to increase corporate accountability, and his zealous approach to regulation.
He presided over investigations into mutual fund trading abuses, hedge funds and equity research. Under his leadership, the SEC, frequently working with other state and federal regulators, drew billions of dollars in fines and restitution from firms found guilty of fraud or wrongdoing.
Donaldson, who also served as chairman and chief executive of the New York Stock Exchange, was appointed as advisory council chairman of boutique Perella Weinberg last year.
At Renaissance’s investor conference in Kiev last year, Donaldson spoke on the same platform as the bank’s founder Stephen Jennings.
The pair have known one another since DLJ partnered with Renaissance to bring Russian telecommunications firm Vimpelcom to the New York Stock Exchange in 1997.
In the same year, DLJ announced it would open an office in Moscow just prior to the Russia’s financial crash.
DLJ was one of a roster of Western banks that lost $40 billion when the Russian government defaulted.
On a trip to Moscow a decade ago, Donaldson said the biggest barriers for Russian companies listing overseas were the conversion to Western-style accounting and corporate governance.
Leading Russian search engine Yandex plans to float shares on New York’s Nasdaq this Autumn and Renaissance is one of the three banks who have been hired to organise the offering.
www.efinancialnews.com
Monday, 24 March 2008
Abramovich behind ultra rich hospital
Wealth Bulletin
20 March 2008
Jason Corcoran, Moscow
Billionaire's investment vehicle is behind a clinic for Russia's millionaires
Russian oligarch Roman Abramovich has opened a luxury hospital in Moscow for the city's millionaires.
The hospital has been established by Abramovich's investment vehicle Millhouse Capital, which invested about $10m in the project, according to Russian newspaper reports.
The clinic for millionaires will distinguish from the vast majority of the city's hospitals, where most of equipment dates back to the Soviet era. Russia's ultra rich previously had to travel to go to Israel, Switzerland or the US for first class medical services.
The hospital is capable of servicing up to 50 VIP patients at a time and the average annual fee will be 1.5 million rubles (about $64,000) per patient.
It is located in the north-west of Moscow, close to the so-called reservation of millionaires, known as Rublyovka. President Putin has a luxury bungalow located in Rublyovka, where houses go for anywhere from $5m to $20m.
Artyom Tolokonin, a spokesman for the hospital, said the hospital hopes to attract not only wealthy Russians, but Western millionaires too.
Chelsea football club owner Abramovich runs his multi-billion dollar assets through Millhouse, which includes a 44% stake in Russian steelmaker Evraz Group.
Russian magazine Finans last month said Abramovich had increased his fortune by 9.5% to $24bn last year.
20 March 2008
Jason Corcoran, Moscow
Billionaire's investment vehicle is behind a clinic for Russia's millionaires
Russian oligarch Roman Abramovich has opened a luxury hospital in Moscow for the city's millionaires.
The hospital has been established by Abramovich's investment vehicle Millhouse Capital, which invested about $10m in the project, according to Russian newspaper reports.
The clinic for millionaires will distinguish from the vast majority of the city's hospitals, where most of equipment dates back to the Soviet era. Russia's ultra rich previously had to travel to go to Israel, Switzerland or the US for first class medical services.
The hospital is capable of servicing up to 50 VIP patients at a time and the average annual fee will be 1.5 million rubles (about $64,000) per patient.
It is located in the north-west of Moscow, close to the so-called reservation of millionaires, known as Rublyovka. President Putin has a luxury bungalow located in Rublyovka, where houses go for anywhere from $5m to $20m.
Artyom Tolokonin, a spokesman for the hospital, said the hospital hopes to attract not only wealthy Russians, but Western millionaires too.
Chelsea football club owner Abramovich runs his multi-billion dollar assets through Millhouse, which includes a 44% stake in Russian steelmaker Evraz Group.
Russian magazine Finans last month said Abramovich had increased his fortune by 9.5% to $24bn last year.
Tuesday, 18 March 2008
Polar explorers in Ukraine
Business New Europe
Jason Corcoran in Moscow
March 18, 2008
UK-listed investment group Polar Capital is shutting its Moscow office in March after deciding to relocate its Eastern European operations to the Ukrainian capital Kyiv, citing a lack of quality deals in Russia and the growing attractiveness of Ukraine's economy.
"Russia is entering a period of sub-par returns compared to historical margins and some of the value had disappeared," Anton Khmelnitski, Polar's Moscow-based director, told bne. "Ukraine is insulated from the credit fallout and there's no downside to its top-five stocks, which we won't be able to short. The underlining reason is that we simply need to be closer to our investments."
Polar, which runs traditional and hedge funds, has cut the Russian exposure of its $220m Elbrus fund to 15% from 70% six months ago, and has sold down its holdings in blue-chips such as Russia's electricity monopoly UES and Golden Telecom. "There's a lot of good stuff still in Russia, but we are a boutique and we have more room to manoeuvre in smaller countries like Ukraine, which is about five years behind Russia," Khmelnitski says.
Contrarians
Polar's view on Russian stocks is at odds with Moscow's analyst community, who feel there could be 60% upside this year when the current sell-off ends. Russia's RTS index is down around 13% from the record high hit on December 12, after falling by as much as 20%. "A 20% fall from the high is regarded as a bear market for equities and, historically, in global markets it is a level when buying resumes," says Chris Weafer, chief strategist at Moscow's UralSib.
However, Khmelnitski believes that Ukraine will outpace Russia or any other place in a bull market and during a global slowdown because it's "cut off from the international capital markets." Ukraine's main stock exchange, the PFTS, grew last year 135.4% and is down by about 10% from the start of this year.
"The investment banks are all wrong because they are driven by other considerations. Just ask any banks in Europe which market has received most bank M&A activity, its Ukraine," explains Khmelnitski. "The Russian top-down situation qualifies best, as I often say, as a macro-trap with little value bottom up. See the performance of IPOs - excess liquidity will fall to 15% and eventually to zero."
Khmelnitski joined Polar Capital in April 2006 from Kazimir Partners, which was previously known as Brunswick Asset Management. He spent three years at Kazimir as head of equities. Prior to Brunswick, Khmelnitski was at Swiss group Pictet Asset Management in London where he spent almost six years managing the Eastern European Trust, a $100m exchange-listed company, which collected a number of awards for its performance and investment style. At the same time, he was also responsible for $500m of equity investments in Emerging Europe and Pictet's global emerging market oil and gas sector. Khmelnitski was born in Moscow, but grew up and received his education in Switzerland. A cerebral and quietly spoken man, he holds a Certificate in Financial Engineering from the FAME Foundation.
Khmelnitski says Polar will launch a new Ukrainian fund to invest $500m in public and private companies at early stages and those launching IPOs. Four analysts are to be hired, in addition to the two fund managers transferring from Moscow. Polar has already taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon Ukrainian Properties and Development fund. The fund also made money through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kyiv operation will primarily focus on property, domestic food, pharmaceuticals, high-tech firms and insurance companies. "The property market is at the beginning of its cycle and there are a lot of obvious opportunities in food, consumer goods and the beverage market," says Khmelnitski. "Accession to the WTO is a milestone event and will be key to this economy. "
Polar joins Sweden's East Capital as one of the few foreign investors to set up in Ukraine. East Capital's Bering Ukraine fund has grown to $304.68m and is up 180% since its inception. Investment banks are also being drawn to one of the best performing stock exchanges in the world last year. Credit Suisse opened a representative office in April, while Russia's Renaissance Capital has a full-service operation, competing with domestic market leaders Dragon Capital and Concorde. In November, Deutsche Bank said it was going to open an affiliated branch in Ukraine when the country joins the World Trade Organization.
www.businessneweurope.eu
Jason Corcoran in Moscow
March 18, 2008
UK-listed investment group Polar Capital is shutting its Moscow office in March after deciding to relocate its Eastern European operations to the Ukrainian capital Kyiv, citing a lack of quality deals in Russia and the growing attractiveness of Ukraine's economy.
"Russia is entering a period of sub-par returns compared to historical margins and some of the value had disappeared," Anton Khmelnitski, Polar's Moscow-based director, told bne. "Ukraine is insulated from the credit fallout and there's no downside to its top-five stocks, which we won't be able to short. The underlining reason is that we simply need to be closer to our investments."
Polar, which runs traditional and hedge funds, has cut the Russian exposure of its $220m Elbrus fund to 15% from 70% six months ago, and has sold down its holdings in blue-chips such as Russia's electricity monopoly UES and Golden Telecom. "There's a lot of good stuff still in Russia, but we are a boutique and we have more room to manoeuvre in smaller countries like Ukraine, which is about five years behind Russia," Khmelnitski says.
Contrarians
Polar's view on Russian stocks is at odds with Moscow's analyst community, who feel there could be 60% upside this year when the current sell-off ends. Russia's RTS index is down around 13% from the record high hit on December 12, after falling by as much as 20%. "A 20% fall from the high is regarded as a bear market for equities and, historically, in global markets it is a level when buying resumes," says Chris Weafer, chief strategist at Moscow's UralSib.
However, Khmelnitski believes that Ukraine will outpace Russia or any other place in a bull market and during a global slowdown because it's "cut off from the international capital markets." Ukraine's main stock exchange, the PFTS, grew last year 135.4% and is down by about 10% from the start of this year.
"The investment banks are all wrong because they are driven by other considerations. Just ask any banks in Europe which market has received most bank M&A activity, its Ukraine," explains Khmelnitski. "The Russian top-down situation qualifies best, as I often say, as a macro-trap with little value bottom up. See the performance of IPOs - excess liquidity will fall to 15% and eventually to zero."
Khmelnitski joined Polar Capital in April 2006 from Kazimir Partners, which was previously known as Brunswick Asset Management. He spent three years at Kazimir as head of equities. Prior to Brunswick, Khmelnitski was at Swiss group Pictet Asset Management in London where he spent almost six years managing the Eastern European Trust, a $100m exchange-listed company, which collected a number of awards for its performance and investment style. At the same time, he was also responsible for $500m of equity investments in Emerging Europe and Pictet's global emerging market oil and gas sector. Khmelnitski was born in Moscow, but grew up and received his education in Switzerland. A cerebral and quietly spoken man, he holds a Certificate in Financial Engineering from the FAME Foundation.
Khmelnitski says Polar will launch a new Ukrainian fund to invest $500m in public and private companies at early stages and those launching IPOs. Four analysts are to be hired, in addition to the two fund managers transferring from Moscow. Polar has already taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon Ukrainian Properties and Development fund. The fund also made money through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kyiv operation will primarily focus on property, domestic food, pharmaceuticals, high-tech firms and insurance companies. "The property market is at the beginning of its cycle and there are a lot of obvious opportunities in food, consumer goods and the beverage market," says Khmelnitski. "Accession to the WTO is a milestone event and will be key to this economy. "
Polar joins Sweden's East Capital as one of the few foreign investors to set up in Ukraine. East Capital's Bering Ukraine fund has grown to $304.68m and is up 180% since its inception. Investment banks are also being drawn to one of the best performing stock exchanges in the world last year. Credit Suisse opened a representative office in April, while Russia's Renaissance Capital has a full-service operation, competing with domestic market leaders Dragon Capital and Concorde. In November, Deutsche Bank said it was going to open an affiliated branch in Ukraine when the country joins the World Trade Organization.
www.businessneweurope.eu
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.
Sberbank to team up with Troika
Financial News
Jason Corcoran in Moscow
04 March 2008
Russia's biggest lender, Sberbank, is to sign an agreement to distribute mutual funds for Troika Dialog which could lead to greater co-operation between the two banks.
German Gref, the new chief executive of State-controlled Sberbank, said last month it was considering moving into investment banking, but no decision has yet been made on whether it will be developed internally or via acquisition.
Troika, a privately-owned investment bank, has previously rejected takeover approaches from JP Morgan and Credit Suisse.
Having hired Goldman Sachs to look into a flotation, Troika last year shelved plans for a listing until after Russia's presidential elections, which took place this weekend.
Pavel Teplukin, one of the founders of Troika and the head of its asset management unit, said the third-party distribution deal with Sberbank could lead to further co-operation.
He said: "We are trying to explore various avenues for our co-operation with Sberbank after the change in its management. Sberbank is one of the largest banks in the world and we have plenty of ideas."
Troika has over $5bn (€3.3bn) in funds under management but only $500m of that is from retail funds, known in Russia as public investment funds (PIFs).
Teplukin said the bank wanted to grow its mutual fund business to $7bn by 2012.
State-controlled Sberbank raised $8.8bn in May last year on the domestic market to recapitalise its balance sheet and finance lending growth.
The bank, which delayed a $1.5bn London share offering until the third quarter, has been overhauling its senior management team following the appointment of former economy minister Gref as chief executive late last year.
Anton Karamzin recently joined Sberbank from Morgan Stanley's Russian office as chief finance officer and deputy chairman.
Jason Corcoran in Moscow
04 March 2008
Russia's biggest lender, Sberbank, is to sign an agreement to distribute mutual funds for Troika Dialog which could lead to greater co-operation between the two banks.
German Gref, the new chief executive of State-controlled Sberbank, said last month it was considering moving into investment banking, but no decision has yet been made on whether it will be developed internally or via acquisition.
Troika, a privately-owned investment bank, has previously rejected takeover approaches from JP Morgan and Credit Suisse.
Having hired Goldman Sachs to look into a flotation, Troika last year shelved plans for a listing until after Russia's presidential elections, which took place this weekend.
Pavel Teplukin, one of the founders of Troika and the head of its asset management unit, said the third-party distribution deal with Sberbank could lead to further co-operation.
He said: "We are trying to explore various avenues for our co-operation with Sberbank after the change in its management. Sberbank is one of the largest banks in the world and we have plenty of ideas."
Troika has over $5bn (€3.3bn) in funds under management but only $500m of that is from retail funds, known in Russia as public investment funds (PIFs).
Teplukin said the bank wanted to grow its mutual fund business to $7bn by 2012.
State-controlled Sberbank raised $8.8bn in May last year on the domestic market to recapitalise its balance sheet and finance lending growth.
The bank, which delayed a $1.5bn London share offering until the third quarter, has been overhauling its senior management team following the appointment of former economy minister Gref as chief executive late last year.
Anton Karamzin recently joined Sberbank from Morgan Stanley's Russian office as chief finance officer and deputy chairman.
Monday, 3 March 2008
Poster power looms large in Putin’s Russia
Financial News
By Jason Corcoran
03 March 2008
Letter from Moscow
A massive billboard featuring President Vladimir Putin walking next to a grinning Dmitry Medvedev looms large on the plaza leading to Red Square.
The words underneath the image of the outgoing President and his hand-picked successor read: “Together we will win.”
Yesterday’s presidential election wasn’t a question of if President Putin’s protégé would win, but by how much.
A carefully choreographed campaign and a near monopoly by the Kremlin ruling party of television and outdoor advertising almost guarantees Medvedev will be confirmed as the next President of Russia this week.
The image of Medvedev and Putin adorning the scaffolding of the city’s forthcoming Four Seasons Hotel had replaced a Rolex ad featuring tennis player Marat Safin in action.
A Moscow advertising source claimed officials from Putin’s United Russia party had secured billboard space for the elections in locations around the city at well below market rates.
Advertising has become big business in a city where designer brands have become important status symbols for nouveau riche Russians and the wannabes.
Companies spent a record 123bn roubles on advertising in Russia in the first nine months of last year, 24% higher than in the same period last year, according Russia’s Association of Communication Agencies.
Russia’s biggest player in billboard advertising is News Outdoor Group.
Its parent said last year it might sell the company, which owns more than 50,000 ad displays on billboards and bus shelters throughout Russia and the other Commonwealth of Independent States countries. Goldman Sachs has been retained to look at “strategic options”, which could also include attracting private equity partners.
The Moscow City Government claimed the company owed about $15.5m in unpaid fees for advertising space. It said the company has unjustly claimed discounts of up to 90%.
News Outdoor denied an inspection by ministry officials was related to the payment demands and assured customers and partners the incident would have no impact on its work.
Gallery Group, Russia’s second-largest operator recently acquired small operator Gorod Media and is plotting an initial public offering to fund more acquisitions and to challenge News Outdoor’s position.
While other forms of advertising on television and online are growing, the outdoor market in Moscow seems to be reaching saturation point.
Pressure on the industry is due to increase following the Government’s announcement it will create three advertising-free zones by the end of year.
The first zone being proposed is the area around the Kremlin’s embankments and the nearby Cathedral of Christ the Saviour.
Other zones concern the space surrounding the city’s Novodevichy Convent and Kolomenskoye Estate.
This move will require the demolition of thousands of advertising hoardings, which generate their owners an estimated $15m a year.
The operators generally have five-year contracts to operate the billboards and are expected to receive some form of compensation.
It is not yet clear whether the Moscow authorities will preclude Government-sponsored advertising in these zones. Some of the most pervasive advertising over the past few months has been for “Putin’s Plan”, “Medvedev’s Course” and, last summer, for VTB’s “People’s IPO”.
By Jason Corcoran
03 March 2008
Letter from Moscow
A massive billboard featuring President Vladimir Putin walking next to a grinning Dmitry Medvedev looms large on the plaza leading to Red Square.
The words underneath the image of the outgoing President and his hand-picked successor read: “Together we will win.”
Yesterday’s presidential election wasn’t a question of if President Putin’s protégé would win, but by how much.
A carefully choreographed campaign and a near monopoly by the Kremlin ruling party of television and outdoor advertising almost guarantees Medvedev will be confirmed as the next President of Russia this week.
The image of Medvedev and Putin adorning the scaffolding of the city’s forthcoming Four Seasons Hotel had replaced a Rolex ad featuring tennis player Marat Safin in action.
A Moscow advertising source claimed officials from Putin’s United Russia party had secured billboard space for the elections in locations around the city at well below market rates.
Advertising has become big business in a city where designer brands have become important status symbols for nouveau riche Russians and the wannabes.
Companies spent a record 123bn roubles on advertising in Russia in the first nine months of last year, 24% higher than in the same period last year, according Russia’s Association of Communication Agencies.
Russia’s biggest player in billboard advertising is News Outdoor Group.
Its parent said last year it might sell the company, which owns more than 50,000 ad displays on billboards and bus shelters throughout Russia and the other Commonwealth of Independent States countries. Goldman Sachs has been retained to look at “strategic options”, which could also include attracting private equity partners.
The Moscow City Government claimed the company owed about $15.5m in unpaid fees for advertising space. It said the company has unjustly claimed discounts of up to 90%.
News Outdoor denied an inspection by ministry officials was related to the payment demands and assured customers and partners the incident would have no impact on its work.
Gallery Group, Russia’s second-largest operator recently acquired small operator Gorod Media and is plotting an initial public offering to fund more acquisitions and to challenge News Outdoor’s position.
While other forms of advertising on television and online are growing, the outdoor market in Moscow seems to be reaching saturation point.
Pressure on the industry is due to increase following the Government’s announcement it will create three advertising-free zones by the end of year.
The first zone being proposed is the area around the Kremlin’s embankments and the nearby Cathedral of Christ the Saviour.
Other zones concern the space surrounding the city’s Novodevichy Convent and Kolomenskoye Estate.
This move will require the demolition of thousands of advertising hoardings, which generate their owners an estimated $15m a year.
The operators generally have five-year contracts to operate the billboards and are expected to receive some form of compensation.
It is not yet clear whether the Moscow authorities will preclude Government-sponsored advertising in these zones. Some of the most pervasive advertising over the past few months has been for “Putin’s Plan”, “Medvedev’s Course” and, last summer, for VTB’s “People’s IPO”.
Polar switches its focus from Moscow to Ukraine
Financial News
Jason Corcoran in Kiev
03 March 2008
The decision by UK investment group Polar Capital to relocate its east European operations from Moscow to Kiev comes amid rising interest among international investors in Ukraine’s economy.
Polar, which runs traditional funds and hedge funds, said the move was prompted by a lack of opportunities in Russia and the growing importance of Ukraine.
Investors are lured to Kiev by attractive valuations and improvements in corporate standards, despite its low liquidity and lack of transparency.
Anton Khmelnitski, a director of Polar, said: “Russia is entering a period of sub-par returns compared with historical margins, and some of the value has disappeared. Ukraine is insulated from the credit fallout and its stock market has been a star performer in global equities. The main index was up 135% last year, which was only bettered by China.”
Investors believe Ukraine will grow following its admittance last month to the World Trade Organisation and the announcement of its co-hosting the 2012 European football championships with Poland.
Polar will shortly launch a Ukrainian fund to invest $500m (€332m) in public and private companies at early stages and those launching initial public offerings. It plans to hire four analysts in addition to the two fund managers transferring from Moscow.
The manager has taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon-Ukrainian Properties & Development. The group has also made money for its investors through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kiev operation will primarily focus on property, domestic food, pharmaceuticals, high-technology companies and insurance businesses.
Khmelnitski said: “The property market is at the beginning of its cycle and there are a lot of obvious opportunities in food, consumer goods and the beverage market. Accession to the WTO is a milestone event and will be key to this economy.”
Polar cut the Russian exposure of its $220m Elbrus fund from 70% to 15% six months ago and has sold its holdings in blue chips, including Russia’s electricity monopoly UES and Golden Telecom.
Khmelnitski believes Ukraine will outpace Russia or any other market in a bull market or even during a global slowdown because it is “cut off from the international capital markets”.
Russian bank Troika Dialog has also set up an office in Kiev, where it has secured an asset management licence.
Stephen Cohen, chief executive of Troika’s hedge fund business, said: “We are managing money for a Ukrainian pension fund and looking at different opportunities. The political climate is friendly for doing deals and people want to believe the story. If it’s this good without any government, how good
can it be?”
Ukraine’s legislative programme is at a virtual halt under President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, who are in a coalition for the second time after elections last autumn.
But Troika’s hedge fund has zero exposure to Ukraine and Cohen believes Russia is a better play.
The Ukraine’s main stock exchange, the PFTS, has fallen 5.9% since the start of the year, compared with Russia’s RTS index, which is off by 9.1% – Cohen believes Moscow is undervalued.
Moreover, turnover on Kiev’s stock market is just $28m a day, compared with about $6bn on Moscow’s. Cohen said: “Liquidity is difficult. If you start talking about an investment, you prevent yourself from executing.”
Tom Adshead, head of research at Sito Capital, an emerging markets hedge fund manager with offices in Kiev, said: “It is a very illiquid market but there is great value from buying and holding stocks benefiting from strong domestic growth.” Sito recently launched a Ukraine fund with $50m under management, which is about 40% invested in banks and 40% in steel.
Sweden’s East Capital and Baltic investor Parex Asset Management have also dedicated Ukrainian funds offering foreign investors access to the market.
US-owned, Moscow-based, Pio Global has announced plans for three mutual funds in Kiev focusing on emerging mid-cap companies. Russian commercial bank Uralsib is also establishing retail funds, a segment that is dominated by local participants.
Ukraine’s gross domestic product rose 7.3% last year, beating original targets. GDP growth this year is expected to slow down only fractionally. The value of domestic funds is not yet measurable as a percentage of Ukraine’s GDP. This compares with 5% of GDP in Russia and 10% in the US.
Alexander Pertsovsky, chief executive of Moscow-based investment bank Renaissance Capital, believes a growing boom in the number of retail investors this year will help market conditions.
Pertsovsky said at a Renaissance Capital conference last month in Kiev: “Once the boom starts in Ukraine, the mutual fund and asset management sector will grow dramatically, helping to expand domestic liquidity.”
Jason Corcoran in Kiev
03 March 2008
The decision by UK investment group Polar Capital to relocate its east European operations from Moscow to Kiev comes amid rising interest among international investors in Ukraine’s economy.
Polar, which runs traditional funds and hedge funds, said the move was prompted by a lack of opportunities in Russia and the growing importance of Ukraine.
Investors are lured to Kiev by attractive valuations and improvements in corporate standards, despite its low liquidity and lack of transparency.
Anton Khmelnitski, a director of Polar, said: “Russia is entering a period of sub-par returns compared with historical margins, and some of the value has disappeared. Ukraine is insulated from the credit fallout and its stock market has been a star performer in global equities. The main index was up 135% last year, which was only bettered by China.”
Investors believe Ukraine will grow following its admittance last month to the World Trade Organisation and the announcement of its co-hosting the 2012 European football championships with Poland.
Polar will shortly launch a Ukrainian fund to invest $500m (€332m) in public and private companies at early stages and those launching initial public offerings. It plans to hire four analysts in addition to the two fund managers transferring from Moscow.
The manager has taken stakes in Ukrainian insurance company Oranta and locally listed property developer Dragon-Ukrainian Properties & Development. The group has also made money for its investors through a series of pre-flotation Ukrainian investments, taking stakes in companies shortly before they listed.
The new Kiev operation will primarily focus on property, domestic food, pharmaceuticals, high-technology companies and insurance businesses.
Khmelnitski said: “The property market is at the beginning of its cycle and there are a lot of obvious opportunities in food, consumer goods and the beverage market. Accession to the WTO is a milestone event and will be key to this economy.”
Polar cut the Russian exposure of its $220m Elbrus fund from 70% to 15% six months ago and has sold its holdings in blue chips, including Russia’s electricity monopoly UES and Golden Telecom.
Khmelnitski believes Ukraine will outpace Russia or any other market in a bull market or even during a global slowdown because it is “cut off from the international capital markets”.
Russian bank Troika Dialog has also set up an office in Kiev, where it has secured an asset management licence.
Stephen Cohen, chief executive of Troika’s hedge fund business, said: “We are managing money for a Ukrainian pension fund and looking at different opportunities. The political climate is friendly for doing deals and people want to believe the story. If it’s this good without any government, how good
can it be?”
Ukraine’s legislative programme is at a virtual halt under President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, who are in a coalition for the second time after elections last autumn.
But Troika’s hedge fund has zero exposure to Ukraine and Cohen believes Russia is a better play.
The Ukraine’s main stock exchange, the PFTS, has fallen 5.9% since the start of the year, compared with Russia’s RTS index, which is off by 9.1% – Cohen believes Moscow is undervalued.
Moreover, turnover on Kiev’s stock market is just $28m a day, compared with about $6bn on Moscow’s. Cohen said: “Liquidity is difficult. If you start talking about an investment, you prevent yourself from executing.”
Tom Adshead, head of research at Sito Capital, an emerging markets hedge fund manager with offices in Kiev, said: “It is a very illiquid market but there is great value from buying and holding stocks benefiting from strong domestic growth.” Sito recently launched a Ukraine fund with $50m under management, which is about 40% invested in banks and 40% in steel.
Sweden’s East Capital and Baltic investor Parex Asset Management have also dedicated Ukrainian funds offering foreign investors access to the market.
US-owned, Moscow-based, Pio Global has announced plans for three mutual funds in Kiev focusing on emerging mid-cap companies. Russian commercial bank Uralsib is also establishing retail funds, a segment that is dominated by local participants.
Ukraine’s gross domestic product rose 7.3% last year, beating original targets. GDP growth this year is expected to slow down only fractionally. The value of domestic funds is not yet measurable as a percentage of Ukraine’s GDP. This compares with 5% of GDP in Russia and 10% in the US.
Alexander Pertsovsky, chief executive of Moscow-based investment bank Renaissance Capital, believes a growing boom in the number of retail investors this year will help market conditions.
Pertsovsky said at a Renaissance Capital conference last month in Kiev: “Once the boom starts in Ukraine, the mutual fund and asset management sector will grow dramatically, helping to expand domestic liquidity.”
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