Tuesday, 24 March 2009

Swiss manager G2 snaps up weakened Russian rivals

Financial News

Jason Corcoran in Moscow
24 March 2009

Swiss family office G2 Group has taken large equity stakes in two rival Russian investment firms which were forced to restructure following the equity market’s collapse and client withdrawals.

G2, which manages $1bn (€735m) in alternative assets, has become a shareholder and partner in Da Vinci Capital and Diamond Age Capital Advisors, two firms whose offices face one another across Moscow’s Moskva river.

Russian hedge funds are attempting to restructure and restart with new investors as the economy stabilises. Russia’s Micex index hit a 18-week high on Friday, rising above 800 points as energy and metal stocks were boosted by strong global commodity prices.

Oleg Jelezko, managing partner and chief executive of Da Vinci Capital, said: “G2 offers investment as well as partnership. We have put our hedge fund on their platform and they have hired some great people for us. They have also extended their investment from the holding company to our private equity operation.”

Da Vinci, which had $250m of assets under management in mid-2008, was set up in 2007 by former Renaissance Capital executives as a joint venture with international fund group BSG.

G2, which replaces BSG as a partner, is investing $10m (€7.4m) into Da Vinci’s hedge fund and $10m into its private equity fund, which has a fundraising target of $300m.

The Swiss group, which is headed by financier Gualtiero Giori, also recently became a partner and equity investor in hedge fund business Diamond Age Capital Advisors.

Slava Rabinovich, managing partner of Diamond Age, told investors that current valuations represent a “once in a lifetime” opportunity. Rabinovich, former deputy portfolio manager to Bill Browder at Hermitage Capital, set up the firm in 2005.

Norway sovereign fund picks manager for Russian play

Financial News

Jason Corcoran in Moscow

17 March 2009

Norway's $330bn (€257bn) state pension fund, one of the world's largest sovereign wealth funds, has increased its exposure to Russia by two and a half times and hired Prosperity Capital to run a mandate.

Swedish firm Prosperity, which manages about $1.5bn in Russian and CIS equities, said the Norwegian reserve fund’s mandate was its biggest yet, although declined to give details due to client confidentiality.

Mattias Westman, chief executive of Prosperity, said he hoped the faith shown in Russia by a sovereign fund will make other major institutions feel more comfortable about investing in the country. He said: “We have seen an increase in interest in the last weeks. Nothing very big but it’s much more constructive. We have endowments, pension funds and family offices considering further investment.”

A spokeswoman for Norway’s reserve fund said exposure to Russia had increased but declined to comment on individual managers.

The fund does not disclose the size of its mandates, but typically awards between €30m and €160m to new managers, according to its website, as part of a rolling programme.

Russia’s RTS-index of leading stocks has rallied by 15% over the past month after sliding by 75% since last August. Investors are being lured back gradually by the recent bounce in oil prices and signs that the government has managed to stablise the rouble.

The Norwegian reserve fund has outsourced 13% of the fund’s assets, or about €34bn, to external fund managers in mainly emerging markets worldwide and specialised sectors

The fund’s exposure to Russia stood at 0.83% at the end of 2008, according to the fund’s annual report issued on March 11.

The value of Russian companies in its internally managed portfolio increaed by 2.5 times to $840m by the end of 2008. Exposure to Brazil was 0.84% while the other Bric countries of India and China represented 0.77% and 0.79% of investments.

At the end of 2007, the fund has just 14 investments in Russian equities. A year later, its fund managers had stakes in 46 Russian companies, including a 1.04% stake in Ursa Bank, 1% in carmaker Gaz Group and a 1.6% share of retailer M Video.

The fund has also built up exposure to Russia’s recently deregulated electricity sector through a 0.86% stake RAO Energy System East, a 3% stake in OJSC Interregional Distribution Grid Company Co Center and Privolzhya and 1.25% in OJSC Interregional Distribution Grid Company North West.

JP Morgan launches in Kazakhstan

Financial News

Jason Corcoran in Moscow
12 March 2009

JP Morgan opened a representative office in Kazakhstan last week just as the government began to appoint financial advisers to restructure its troubled banking sector.

Bill Winters, co-chief executive of investment banking at JP Morgan, travelled to Kazakshstan for the opening last week and had talks with Kazakhstan’s prime minister Karim Masimov and government officials.

The representative office is staffed by “a handful of people”, according to a spokeswoman for JP Morgan, and is headed by Timur Kunanbayev, who had been the London-based head of investment banking coverage for Kazakhstan since 2007. Prior to JP Morgan, he had been managing director of Kazakh bank Alliance.

Kazakhstan’s banking sector has been badly hit by the collapse of the property sector in Almaty and Astana, failing oil prices and the closure of the international credit markets.

The Kazakh government took control over Alliance and BTA Bank, two of the countries largest lenders in February, after they breached liquidity and capital adequacy ratios. The government has said the takeovers are only a temporary measure directed at stabilizing the banking system.

BTA, the largest lender, said on Tuesday it was not in talks to restructure its debt despite market speculation and the appointment of Goldman Sachs as an adviser.

Russian bank Renaissance Capital won a mandate in November to co-manage the Kazakhstan government's distressed asset fund. Other Western banks are believed to be talking to the government about potential mandates.

The spokeswoman for JP Morgan said Winters had met with government officials but declined to comment on any role the bank might play in advising restructuring of the banking sector.

She said: “In terms of clients, we will focus largely on servicing quasi-sovereign institutions, selected banks and high-quality corporates.”

The rep office located in Kazakhstan’s financial capital of Almaty will support the bank’s industry and product teams in London and worldwide. Domestic clients will be offered access to investment banking products, including debt and equity capital markets, mergers and acquisitions, and global markets solutions. The office will also promote JP Morgan’s range of treasury and securities services.

Credit Suisse, Renaissance Capital and Troika Dialog all have operations in Almaty.

Thursday, 5 March 2009

Russia's double-headed eagle

Guardian Unlimited

Jason Corcoran: Rather than reversing Putin's policies, Medvedev has only hinted at reform. Time will tell if he can step out of the shadows

Dmitry Medvedev was destined to be a lame duck leader when he was elected Russia's third president a year ago. His inauguration ushered in a ruling tandem with his mentor and predecessor Vladimir Putin seemingly shifting a gear to become prime minister. Putin, however, has so far done all of the steering while Medvedev has been along for the ride.

Russians have not been duped, judging by the latest opinion poll by the respected Levada Centre, which indicate only 12% believe Medvedev wields real power. Another 34% believe it lies with Putin, while 50% believe it is shared between them.

Buoyed by rising commodity prices, Putin's eight-year reign restored Russia's shattered economy, raised living standards for many and re-established Russia's standing internationally as a power-broker.

A tough act to follow. Unfortunately, events have not been kind to Medvedev; the equity market and economy have collapsed; a war with Georgia and a major gas dispute with Ukraine have soured relations with Europe; a currency crisis has rattled the public; and an oil price that rose steadily through his predecessors' two terms has tanked.

Medvedev's presidency has brought a change of tone but not a change in substance. His response to the January murders of a human rights lawyer, Stanislav Markelov, and the journalist Anastasia Baburova on a Moscow street were markedly more sympathetic than Putin's gruff response to the 2006 murder of journalist Anna Politkovskaya.

Rather than reverse any of Putin's policies, Medvedev has hinted at reform of the judiciary and the political system. He has subtly criticised Putin's cabinet for its handling of the crisis but hasn't sacked anyone in the federal executive for their mishandling of the economy.

Russia's five-day war with neighbouring Georgia in August was arguably Medvedev's toughest assignment, but many doubt the extent of his involvement in the key decisions. It was Putin, not Medvedev, who appeared in a flak jacket among Russian troops after the outbreak of war, in which Russia quickly routed its southern neighbour.Medvedev had never won elected office before becoming president. He owes his dizzy rise in government and his old job as chairman of energy giant Gazprom to Putin. A former lawyer, Medvedev made a commitment to the rule of law and to stamp out "legal nihilism" a central tenet of his inauguration speech last year. A new trial commencing on Wednesday of jailed tycoon Mikhail Khodorkovsky is a chance to show his leadership credentials and whether he is committed to those promises.

Khodorkovsky, the former owner of oil giant Yukos was jailed for eight years in 2005 for fraud and tax evasion in a trial regarded widely as a vendetta by Putin, for his funding of rival political forces. If Khodorkovsky is convicted on new charges, Medvedev will be seen as suffering a setback in his campaign for the rule of law. If the former oligarch is acquitted, the ex-KGB hardliners surrounding Putin will be seen to have lost.

Russia's double-headed eagle is working as a tandem, albeit with one driver and a passenger, who is a spoke in Putin's wheel. Only time will tell whether Medvedev has the capacity to exercise his legs and turn direction.


guardian.co.uk © Guardian News and Media 2009