Ben Aris in Moscow -

"Amazing" was probably the most often employed word in September to describe the events on Russia's financial markets. Those that saw 75% of the value of their investments evaporate used it in lieu of a better description for the pain they were feeling: surprises are not always pleasant.

But Vadim Botchkarev, head of business development at Da Vinci Capital, used the same word to describe the scale of the bargains now on offer. Only three months ago portfolio investors were looking forward to, at best, a 20% rise in assets' worth over the next six months. Now the potential gains are in the thousands - provided, of course, the crisis subsides and confidence returns.

The crisis has forced over-leveraged oligarchs and companies into a fire sale of assets to cover debts and margin calls. For an investor with cash, stakes in some world-class companies are being sold at a fraction of prices quoted only a few months ago; Russian companies' price/earning ratios are a mere 4.4%, according to Troika Dialog, against an emerging market average of about 8%, making Russian stocks amongst the cheapest in the world. Construction and retail have been particularly hard hit. bne sources in the sector say some developments are already being sold off at 60-70% discounts on evaluations made in August.

Against this backdrop, up-and-coming Russian asset management company Da Vinci Capital has launched a crisis opportunities fund. Botchkarev says the fund already has commitments and is confident of collecting the first $100m of the planned $300m total in the next month.

The company was founded in July 2007 by a team of former Renaissance Capital employees. The CEO Oleg Jelezko was head of structural products at Renaissance Capital, where he managed $1.2bn of assets in six funds.

Da Vinci launched a private equity fund in December last year, which has $114m under management, and did an IPO on the new London Special Funds Market in London in May - the first fund ever to float on this new platform. "It is a new market for qualified investors. Our fund is designed to offer liquid access to the illiquid markets of the CIS and Russia," says Botchkarev. The fund has already bought the Lubel coal mine in Ukraine that sits on significant deposits and was planning to IPO in June next year to raise funds for development.

However, Da Vinci's other fund is not doing as well. In January, the company launched a long-short hedge fund, but struggled to raise much money after Russian equity markets were hit by a wave of selling that month. As the financial firestorm began to rage again in May, the fund has suffered a series of redemptions and currently only has $15m under management. Botchkarev says they are considering winding the fund up completely.

But the crisis is throwing up as many opportunities as it's creating problems for asset management companies, says Botchkarev. "Everyone is faced with a choice now. The crisis caught big companies in fast-growth mode by surprise. They will either have to hunker down and try to survive for say the next two years, or they can go out, raise capital and buy their competition," says Botchkarev.

The new crisis fund is a limited partnership with a seven-year lock in. Da Vinci is currently marketing the fund in the US and other financial centres. The fund will be mainly looking for opportunities in the main CIS markets of Russia, Ukraine and Kazakhstan, but has also been looking into the frontier markets in the region such as Uzbekistan. "Bottom line is, there is nothing fundamentally wrong with these economies," says Botchkarev. "Russia is already the largest consumer market in Europe. Companies like General Motors have already invested $500m and committed themselves to investing another $2bn. What is going on now is simply amazing, but I am confident that we will get back to where we were within the next two years."

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