FUNDS: Roland Nash quits Rencap to join Verno Capital

By bne IntelliNews December 13, 2010

bne -

A doyen of the Russian market and chief strategist at Renaissance Capital, Roland Nash has quit his job and joined a fund that raised the first-ever investment by Abu Dhabi in Russia.

Nash will join Chief Investment Officer Dmitri Kryulov, one of three founders of Verno Capital, as co-partner. Verno has been going for about a year and has $30m under management, though it announced at the end of November a $100m commitment from Mubadala Development Company, a state-owned investment vehicle.

Nash, who has been the public face of Renaissance Capital, will become the chief investment strategist at Verno, which the partners hope to build into the leading specialist fund for the Commonwealth of Independent States. "Everyone recognises the need to invest into emerging markets but they still remain nervous," said Nash over the weekend. "There are other funds out there investing into this part of the world, but no one has the CIS focus Verno has. Mubadala is very conservative and has never invested into this region before, so their commitment is a testament to the strength of the story and the focus of the fund."

Before establishing Verno, Kryukov and his senior team were at Kazimir Partners, which delivered annualized returns to investors of 30% from inception in 2002 to 2008.

Nash has spent his entire career at Rencap, joining the bank as an associate shortly after completing his BA in politics, philosophy and economics when the bank was founded in 1996. He rose quickly through the ranks, eventually replacing Dirk Damrau, Rencap's first head of research.

Damrau joined the original Rencap team under Boris Jordan and is responsible for setting the sassy style of Rencap research that Nash turned into a fine art. Nash's string of penetrating (and funny) research notes about the relationship between his beaten-up Lada Zhiguli and the Russian economy in transformation are classics of the informal but informative research genre. An oft-cited commentator, Nash's opinion is not only sought out by international investors, but also by the Kremlin, which has regularly called him in for his input on the reform process.

Nash arrived in Russia while still working on his PPE degree at Balliol College, Oxford University, to join the Russian-European Centre for Economic Policy (RECEP), an EU-funded Tacis project that provided the Russian government with economic and policy advice in the early 1990s. RECEP produced Russia Economic Trends, a monthly publication that The Economist dubbed at the time, "the Bible of economics in Russia."

RECEP was highly influential and Russia Economic Trends was mandatory reading for anyone covering or working in Russia at the time. Most of its members - foreign PhD students from Harvard and LSE, as well as the brightest young Russian economists - have gone on to populate many of the leading investment banks working in Russia. Al Breach was a contemporary and became head of research for Russia at Goldman Sachs, famously persuading the bank to mark all Russian equities to "buy" in 1999 in a legendary call. Rory MacFarquhar, another contemporary, also went on to work at Goldman Sachs, but more recently joined the US Treasury as a senior advisor.

Only last week, Rencap teamed up with the New Economic School to start producing Rencap-NES Macro Monitor, a monthly publication that will in effect recreate Russia Economic Trends. Nash is on the board of directors in the joint venture, a position he will keep as the Rencap representative, despite leaving the bank. "The RenCap-NES Russian Macro Monitor provides a fresh look at economic issues related to the budget, trade, inflation, gross domestic product, industrial production, investment, monetary policy and reforms," the two bodies said in a press release.

Nash was joined at the RenCap-NES press conference by Sergei Guriev, the rector of NES, who (no surprise here) cut his teeth at RECEP. The rational for the publication is that while there is plenty of macroeconomic research produced by the investment banks and the likes of the World Bank, there is a dearth of deep analysis from a truly independent source. Everyone was so badly caught out by Russia's 7% economic contraction at the end of 2008 after five years of 6%-plus growth, the upshot is that everyone wants to see better quality macroeconomic research. "We wanted to give a more optimistic forecast for next year's growth," Nash said at the press conference," but NES were more conservative. So we discussed it and they persuaded me they were right."

The first predictions out of Rencap-NES are more cautious about Russia's prospects for 2011 than those from the government and many international financial organisations, arguing that everything depends on the government's success in carrying out reforms. "Economic growth in Russia will continue to disappoint in 2011. The research team anticipates that economic growth in 2011 will be 3.5%, more or less unchanged from growth in 2010. With the oil price approaching $90/barrel and much of the rest of the emerging world enjoying strong recovery, economic growth at below 4% for Russia should be considered disappointing. Sustainable medium-term growth in Russia can rise from the current 3-4% to 6% with the right structural reforms," the Rencap-NES team said in their inaugural report.

Nash's departure was amicable and relations between him and Rencap's founder and CEO, Steven Jennings, remain good, with Nash remaining on the boards of several companies he supervised while vice president at Renaissance. He will continue to appear as a speaker at Rencap events and Verno Capital will remain a client of Rencap.

DISCLAIMER: Roland Nash is a minority shareholder in bne.

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