Hedge fund managers head off to Uzbekistan

By bne IntelliNews October 1, 2008

Guy Norton in Almaty -

Eurasia Capital Management (ECM) has created the first ever Uzbekistan-dedicated hedge fund. The Uzbekistan Growth Fund was launched in early September with initial capital of just $5m, but ECM founder and managing partner Alisher Ali Djumanov believes that there is the potential to grow the open-ended investment vehicle substantially over the next couple of years.

"We think that there are at least $100m of potential investment projects out there," says Djumanov, adding: "We can have a meaningful impact in Uzbekistan with this dedicated country fund."

The new fund will invest across a variety of asset classes, thus giving investors broad-based exposure to the Uzbekistan economy, which Djumanov claims has strong development prospects. "There is clear upside potential to Uzbekistan, it could be a $100bn economy versus the $20bn one it is now."

ECM will focus on five main asset classes in Uzbekistan. The first will be what Djumanov terms "credit opportunities" - essentially high yield collateralized debt instruments. "We are looking to take advantage of the lack of availability of bank financing in Uzbekistan - even major exporters struggle for working capital."

Djumanov believes that ECM will be able to originate deals offering 20%-plus yields, with downside risk mitigated by being backed by property or other receivables, or the option to convert the debt into equity stakes. The second investment focus will be on publicly traded equities. Although there are no internationally listed companies in Uzbekistan Djumanov says that there is a healthy supply of locally traded stocks in high-quality companies with strong financials. As well as Uzbek-sum denominated equity plays, there are also US dollar-denominated stocks available on the Tashkent stock exchange.

State property

ECM is also looking to take participate in the latest phase of the privatization process in Uzbekistan. "The Uzbek government is selling off small and medium-sized enterprises, which often have distressed financials, but have good land banks which are ripe for redevelopment," says Djumanov, adding that the authorities in Tashkent are encouraging industrial companies to move to the outskirts of cities, thus creating prime city centre development plots.

The next element of the fund will focus on property and property-related investments. "There are plenty of opportunities to work with local developers and buy into the still strong property cycle in Uzbekistan." He says that real estate valuations in Uzbekistan are still relatively low compared to neighbouring Kazakhstan, while there is still demand, especially in the retail and office development spheres. "There are lots of renovation opportunities in Uzbekistan, which are easier to realize than greenfield developments."

Finally, ECM will also look at private equity and venture capital-type investments in the country. "If you have the right people, which we think we do, you can build meaningful businesses in Uzbekistan," says Djumanov. "What we like about Uzbekistan is the pool of entrepreneurial talent that exists there."

The Uzbekistan Growth fund is the fifth investment vehicle launched by ECM in the last three years and follows in the footsteps of other pioneering ventures such as the Mongolia Discovery Fund, which was the first international fund to focus on the country. Other investment opportunities include the firm's flagship fund, the Central Asia Opportunity Fund, which Djumanov claims is the best performer in the region, up 92% since its inception at the end of 2005.

The next fund off the block will be the Eurasia Credit Fund, which will seek pan-regional exposure to local debt and money markets. At the latest count Singapore-headquartered ECM had around $200m under management invested in nine countries - Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan and Uzbekistan.


Send comments to The Editor


Hedge fund managers head off to Uzbekistan

Related Articles

Retail trade slows in Kazakhstan amid economic uncertainty

Naubet Bisenov in Almaty - A free-floating exchange regime for Kazakhstan’s currency, the tenge, is taking its toll on retail trade as the cost of imports rise. While prices have not changed ... more

bne:Chart - Russia begins to steady the ship according to latest Despair Index

Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more

New Kazakh central bank governor re-adopts free floating regime

bne IntelliNews -   The National Bank of Kazakhstan, the central bank, has re-adopted a free-floating exchange regime under the new governor, Daniyar Akishev, who has ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss