Russian opposition activist Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
OUTLOOK 2021 Slovakia
FDI inflows to CEE down 58% in 1H20 but rebound expected
Slovakia to invest €1.2bn in digitisation
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
OUTLOOK 2021 Albania
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Storming parliaments: New Europe's greatest hits
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
OUTLOOK 2020 Bulgaria
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Socialist lawmakers in Moldova scrap settlement on $1bn bank frauds
75% of Montenegrins want EU membership
Montenegro’s new ruling coalition carves up top state jobs
OUTLOOK 2021 Montenegro
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
Romanian construction companies' activity slows in November after intense 2020
OUTLOOK 2021 Serbia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Turkcell denies any affiliation with $1.6bn loan in default extended by Ziraat Bank to Virgin Islands company
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
OUTLOOK 2021 Armenia
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Download the pdf version
Mattias Westman, chief executive of Prosperity Capital Management, is convinced Russian equities will roar again and his firm can repeat the world-beating returns that it posted in the noughties.
Prosperity, the largest Russia-focused portfolio manager, is one of the few remaining players left standing. The 2008 financial crisis wiped out most Russia funds and the country’s subsequent low growth, current recession, and tumbling commodity prices and political isolation over Ukraine has almost led to their extinction.
Prosperity’s Quest fund was the best performer globally for the decade ending December 31, 2009, with a return of 3,300%, according to data from Morningstar. The past five years have been tough as performance nosedived and the firm’s assets under management tumbled from over $5bn to $2bn. Yet Westman, a mild-mannered Swede, is convinced the stellar returns will return.
“Why not?” Westman asks bne IntelliNews in his office overlooking London’s Cavendish Square, a swish area famed for its Georgian listed buildings. “They are the cheapest shares in the world and there is room for a rebound. There was a p/e (price/earnings) ratio of 10 before the crisis and now it’s four, and the companies are certainly better now than before while the market infrastructure is incomparably better.”
Russia’s benchmark Micex Index rose on November 23 to its highest level since 2008 amidst a thaw in relations with the West, progress over Ukraine and a stable ruble. The index has jumped 14% since the start of October.
Prosperity investors, which include the $820bn Norwegian sovereign wealth fund, have a longer investment horizon than mutual funds and high-net-worth individuals, and have been more patient waiting for the market to turn. The minimum investment required to invest with Prosperity is $1mn. “Russia is not that popular,” Westman says. “Another problem is that new regulations mean the break-even levels have become much higher. To break even now, you need over a quarter billion of dollars, so it’s doesn’t matter what your track record is.’’
Swedish funds have been the biggest investors in Russian shares over the past two decades. East Capital, a rival which focuses more on retail investors, manages about €2.1bn and has been busy diversifying away from Russia and the former Soviet Union into China and frontier markets in Africa, the Middle East and Latin America. “We are a different animal,” says Westman.
Shooting the messengers
Prosperity was hit by 16% in client net redemptions last year, which have been partly offset by 10% inflows this year due to renewed interest from institutions.
Westman is heartened that more EU member states appear to be warming to the idea of dropping sanctions against Russia. “But it’s not so urgent,” he says. “If it’s now or in six months, it doesn’t matter much, but we are clearly moving in that direction and it’s accelerating after the terrorist attacks and politicians want to focus on what is important.”
Westman is dismissive of the Western media and cites the Economist and Wall Street Journal as the worst culprits for propagating myths about how sanctions and the drop in commodity prices have crippled Russia. Prosperity has also been critical of the newswire Bloomberg for spooking the market with reports that the Kremlin was considering bringing back capital controls.
Prosperity contends that the main misconception in the West regarding this conflict is that Russia is seeking to re-establish the old Soviet Union and it’s hoping to acquire as much territory as possible in Ukraine.
“Initially in this confrontation, there were a lot of people who weren’t good at economics who thought that under pressure the Russian economy would crumble and all Russians would turn on Putin,” says Westman. “It was beyond naivety. Now people are realising it was never going to work and they are having to adjust.”
Westman seems more guarded about the firm’s stock-picking than before, and less inclined to engage in discussion about egregious abuses of corporate governance.
Prosperity held both Sistema and Bashneft, and their underperformance last year weighed on the portfolio after Sistema boss Vladimir Evtushenkov was arrested and charged with money laundering in oil producer Bashneft’s stock purchase. Evtushenkov has since been cleared, while Prosperity dumped its Sistema stake.
Over the past year, the Prosperity team has acquired stakes in so-called “fallen angels” – businesses which became available at attractive prices on the back of the market’s steep decline. Real estate firm LSR Group, consumer lender Tinkoff Bank and electronics retailer M.Video were some of the bargains they have picked up.
The Russia fund has some exposure to Sberbank, the nation’s biggest lender, but it’s not a big part of its portfolio. “They have done a good job modernising the bank and making it more efficient,” Westman says. “Comparing the bank to when [Herman Gref] came in and now is like night and day.’’
Westman and his team thought about diversifying from Russia about ten years ago before deciding it was better to stick to what they know best.
“I still think the prospects now are very good,” he says. “The companies are getting better, we have a very good team and a good track record. Maybe it’s possible to swap into different markets and do something else, but it’s more for people who make macro bets. We are micro-oriented people and we like the companies. None of those other markets will ever be as big as Russia – not even close. If they want to leave the market to us, good luck to them.”
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
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
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: