RenCap lures US and European fund giants for Russia showcase

RenCap lures US and European fund giants for Russia showcase
Moscow's direct line to blue chips drew investors away from St Petersburg business forum.
By Jason Corcoran in Moscow June 21, 2016

Investors representing trillions of dollars from the US and Europe met on June 21-22 at Renaissance Capital’s annual investor forum with Russian blue-chip companies and representatives from holdings on the Kremlin’s privatisation programme.

Portfolio managers from US fund giants T.Rowe Price, Invesco and Tiaa-Cref, a Teachers pension fund with a whopping $870bn in assets, were to attend, RenCap insiders told bne IntelliNews. UK, Swiss, German and Scandinavian hedge funds were in town for the two-day jamboree with trips to Russia’s regions, include Charlemagne, Deutsche Bank’s DWS unit, Pictet, East Capital, Nordea, Robur, Henderson, Britannia, UBP and Danske.

The cast of international investors met with state energy behemoth Gazprom and lending giant Sberbank, plus other companies that are on the block for privatisation this year, including Bashneft, Alrosa and VTB. A large number of blue chips, including Lukoil, Magnit,, Evraz, Dixy, MTS, O’Key, Rusagro, Sistema, Tinkoff, Lenta and Globaltrans, also met with investors in a series of one-on-one meetings.

Portfolio investors said they skipped President Vladimir Putin’s St Petersburg International Economic Forum (Spief) the previous week to focus on attending RenCap’s investor forum. Indeed, the only flight into St Petersburg from London before Spief was more than half empty.

“I skipped the forum at St Petersburg last week to focus on the RenCap forum,” a London-based fund manager told bne IntelliNews. “Putin’s Davos has become something of a boring echo chamber and, at least, we can sit down with the companies at the RenCap event in Moscow, without all the noise and fuss generated in St Petersburg.”

Daria Khilenkova, a spokeswoman for RenCap in Moscow, declined to comment on the event, the investors or the companies involved.

RenCap certainly pulled out all the stops. The investment bank took out an ad on the whole of page three of the daily Vedomosti financial newspaper on June 20, flagging up its 20-year anniversary in Russia and its claim of “100% success”. And investors were entertained on June 20 at Arkady Novikov’s upmarket Aist restaurant in central Moscow and headed the following night to Strelka, a bar and restaurant in the trendy Red October hipster mecca overlooking the Moscow.

Back in favour

The forum comes as Russian securities and the ruble have surged in recent months, as commodities rebound amid some signs of improving relations between the Kremlin and the West.

Russian assets are slowly returning to favour as the prospect of sanctions being at least partially lifted gathers momentum and the economic slowdown passes bottom. Despite the lingering problems, Russian assets are so cheap that some investors think now is the right time to get back into the market.

The change is most notable in the bond market, even after the state’s recent botched attempt to woo foreign investors into its first Eurobond issue for years. European and US investors steered clear of that controversial Kremlin Eurobond sale because of US State Department pressure and the underwriters’ failure to arrange international clearing in time for the $1.75bn placement of 10-year notes, which were largely bought by domestic investors and some investors in Asia, according to reports

Russia’s dollar-denominated RTS Index was up 20% in the year to date as of June 17, making it one of the best performing markets in the world. The ruble-denominated MICEX Index is up 7%.

Sergio Trigo Paz, head of emerging market debt at BlackRock, the world’s biggest fund manager, told reporters in London earlier in June that he expects “heavy inflows” into emerging markets over the coming year.

But not all is going RenCap’s way. Once Russia’s foremost local investment bank until the emergence of state-controlled VTB and Sberbank, RenCap is still reeling from the sudden departure of its chief executive Igor Vayn in May after three and a half years in the role. Anthony Simone, CEO of the RenCap subsidiaries in London and New York, has been appointed as acting CEO while a special committee forms interally to headhunt for Vayn’s replacement.

“I think he checked out of the rat race,” says one ex-RenCap banker who knows Vayn. “Also, the heat over Onexim must have also have been a cloud on the horizon for him.”

That is a reference to the raid by Federal Security Service operatives on RenCap’s Moscow offices in April, seen as part of an attack on billionaire Mikhail Prokhorov, who has fallen foul of the Kremlin, and his Onexim Group of companies.

A source close to one of Onexim’s structures tells bne IntelliNews that the group believes the searches were authorised by President Vladimir Putin himself after Prokhorov’s media holding RBC reported on the business dealings of his daughter Ekaterina and her husband Kirill Shamalov. “You can imagine the reporting on such a sensitive issue for the president must have gone down like a lead balloon in the Kremlin,” says the source. “It stirred the hornet’s nest.”