Fund manager Prosperity eyes Russian mandates

RUSSIA – Moscow-based fund manager Prosperity Capital Management says it will target mandates from the new Russian defined contribution pension scheme.

“We’re hoping to get that and were trying very hard,” said Prosperity director Mattias Westman. He expects the current monthly inflow of 250 million dollars a month into the Pension Fund of the Russian Federation to increase.

Prosperity has around 300 million dollars under management, an estimated 10%-15% of the market.

The Pension Fund of the Russian Federation will only issue mixed mandates in the beginning, Westman says. Prosperity is an equity specialist at the moment, though it will hire bond specialists.

But within two years, Westman says, equity-only plans will become available. The Russian system, partly modelled on the Swedish PPM scheme, provides an “open forum” that is attractive to fund managers, he adds.

Prosperity, which has until now targeted foreign investors, is in the process of setting up a domestic Russian arm.

“There’s a lot of money flowing around in Russia at the moment,” Westman says - due to the trade surplus and returning capital. “There’s 145 million people with little organised savings.” Most people save via property investment.

Westman identifies the main problem Prosperity has faced in Russia is corporate governance. “Corporate governance is always the main concern,” he says, adding that Prosperity has fought some big battles in that arena. Prosperity partner Alexander Branis sits on the board of oil firm UES.

Accounting standards at Russian companies are not an issue, as the businesses are relatively straightforward to understand, he maintains, with the largest Russian firms reporting in international standards. “I’m not concerned with the accounting.” The simplicity of business operations means you can make good forecasts, he adds.

“Russia is a very dynamic economy and things are changing radically,” he says. The biggest drag on Russian growth was petty corruption.

Capitalising on what it sees as growth opportunities in the Russian commodities sector, Prosperity recently launched a new Russian oil and gas fund. The open-ended fund is aimed as being a part of a global oil and gas portfolio for large western institutions.

As Credit Suisse Asset Management portfolio manager Neil Gregson says: “The overall investment outlook for Russia remains positive as investment risk continues to reduce. There is still value in the Russian oil stocks as well as the wireless service providers.”

Last year Dutch bank ING launched a voluntary pension fund for corporate clients in Russia, called the Non-State Pension Fund ING. It is modelled on similar ING funds in western markets.

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