RUSSIA - Russia specialist, Brunswick Group, is positioning itself to exploit the region's expanding fund management industry in light of recent reforms.
Russia has courted much investor attention recently. As of next year, individuals will have the right to opt for private pension schemes over the compulsory funded element of the state system. This has created potentially lucrative demand for fund management services from both institutions and individuals.
Moscow-headquartered Brunswick has created Brunswick Capital, a new holding company with 50% control of its investment banking unit Brunswick UBS (BUBS) and a 100% share of its investment management arm, Brunswick Asset Management.
Christopher Mackenzie has been appointed executive chairman and chief executive of Brunswick Capital, as well as chairman of BUBS, alongside several other senior hires. Mackenzie was previously president and chief executive officer of Trizec Properties and President of GE Capital Europe.
Brunswick said that it is currently raising additional funds with which to broaden its activities through acquisitions and more hires.
Karen Clarke, newly appointed chief executive of Brunswick Asset Management, said that the firm was reviewing its acquisition possibilities but was not currently engaged in concrete discussions.
She said: “The financial services sector in Russia is beginning to expand rapidly and we are in prime position to take maximum advantage.
“Brunswick has already built a business investing in Russia and now provides a platform from which to launch into broader activities”.
Brunswick Asset Management, which has some US$85m capital under management, is keen to build relationships with third party distributors across Europe.
The firm does not currently hold a license to manage Russian mutual funds or non-state pension funds.
“However we are in the process of working towards this goal,” added Clarke, who was previously director of hedge funds and head of group product development at F&C.
The Russian economy has enjoyed consistent growth in recent years, leading to a significant reduction in capital outflows and increased foreign investment.
With the help of additional economic reform being introduced by the government, as well as an emerging banking system, it is widely anticipated that this growth will continue.
“Russia still has many of the aspects of an emerging market, but is moving very fast towards being recognised and re-rated by the investment community towards an investable asset class,“ explained Clarke.
However, it continues to share certain characteristics with other emerging markets, including difficulty in forecasting earnings due to short past performance history, dependency on commodity prices and other global markets, political risks and liquidity constraints and strategic trading which increases volatility.
“The downside remains if the course of reforms is derailed. However we believe the reforms are in everyone’s interest for increasing the wealth of the country and domestic growth,” said Clarke.
She added: “In the short term the oil price and US market could provide volatility to the Russian market. Although it is the outlook of both which is important for sentiment rather then the actual value. Progress in the reform of the power and gas sectors are necessary to avoid from Russian market becoming too concentrated and progressing towards the market economy.”
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