EUROPE - Convergence Capital, a newly-formed fund manager focused on Central and Eastern Europe and Russia (CEER), has launched a hedge fund which taps into the EU accession market.
CONSTAR (Convergence Strategic Absolute Return Fund) is backed by investment banking boutique Williams de Broë, which has offices in the UK and Australia and is owned by Banque Bruxelles Lambert.
CONSTAR will invest mainly in the 10 EU accession states, whose applications for membership were effectively approved by the ratification of the Nice Treaty by Ireland in October.
Through trading on the CEER markets, CONSTAR targets an annual net return of 40-50% which it aims to achieve whilst maintaining a strong risk discipline.
The fund targets both retail and institutional investors and will cap at US$100m.
James Oates and Nicholas Vardy - now both principals at Convergence Capital - will co-manage the fund, bringing some 20 years' experience of investing in emerging markets.
Oates was previously at Lazard Brothers, UBS and Fleming Investment Management and holds a number of advisory roles for CEER governments and markets, including acting as special adviser to the Bulgarian government.
Vardy worked at Henderson Investors and Creditanstalt Asset Management and is responsible for the development of TERRA. TERRA is Convergence’s proprietary risk and money management system.
He was educated at Stanford and Harvard Law School.
Cheap valuations, successful restructuring and signs of recovery and economic reform in CEER markets will drive both equity and bond markets forward over the coming years,” said James Oates, a principal of Convergence Capital.
There has already been a number of funds in CEER bond markets; equity markets are expected to follow.
15 years ago, Greece, Spain and Portugal were in a similar situation to today's future EU members. Three years prior to their accession their equity markets outperformed their 'European' counterparts by some 75% whilst bond yields fell by over 500 bps.”
Commenting on Williams de Broë’s role, Vardy said: [Their] expertise in the CEER region, both in international corporate finance and broking, provides Convergence Capital with the support and experience that is crucial to our aim of becoming the leading alternative investment manager focusing exclusively on Central and Eastern Europe and Russia.
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