Table 1.Managing companies who directed most assets to Russia.
|Managing company||Assets in Russia(Mln USD)|
|2. Capital International||459,5|
|7. Morgan Stanley||148|
|8. Grantham, Mayo, Van Otterloo||91|
|9. Foreign & Colonial||85,9|
|10. Emerging Markets Investors Corp.||59,2|
Compared with 25-35% per year provided by the rapidly growing American market, investments in the developing markets looked weak, to put it mildly. Their average profitability in 1996 was a little more than 10%, while during the last three years these investments, in their aggregate, were unprofitable (the losses reached 5% on average).
The average profitability of investments in Russia in 1996 was more than 150% per year. It is not surprising that the managers of the funds are happy with the results olstuined in Russia.
Table 2 gives the list of the foreign investment funds which received the highest profits from the investments on the Russian market in 1996.
Table 2.The most profitable funds with the orientation to Russia (as to January 31, 1997)
|Name of the fund||Profitability per year, %|
|1. Regent White Investment Co., Ltd.||250|
|2. Firebird Fund LP (E)||244|
|3. Regent Red Tiger Investment Company||236|
|4. Regent Blue Tiger Investment Company||236|
|5. Regent Golden Tiger Inv Co. (FKI)||232|
|6. Fleming Russia Securities||214|
|7. Russia Fund Ltd.||167|
|8. Eastern Capital Fund Ltd.||153|
|9. Templeton Russia Fund Inc.||143|
|10. Optima Opportunty Fund Ltd.||143|
Here are the opinions of some of the heads of foreign funds about the situation influencing Russia's investment market, about the work of their companies in 1996, and about the perspectives of 1997.
Fleming is the unquestionable leader. Steven Bates, Director of Fleming International Management Ltd: "The company invests the assets of its funds mainly in the blue counters". But still sometimes Fleming risks and buys the shares of companies which are not known or small. But it is a negligible part of its investments. Last year investments in Russia gave quite good profits and there is reason to believe that in the future their effectiveness will not be lower. So, in 1997 we are planning to add to the existing funds another fund of about 50 mln dollars. The investors are pleased that political risks in Russia have become a few times lower than in 1995-1996. However, economic risks come to the forefront now.
Templeton is one of the oldest managing companies on the developing markets. The company declared itself officially in Russia in the summer of 1995. The fund invests only in the shares of the companies whose registers made a contract with a permanent partner of the fund, one of the largest world depositories, the Chase Manhattan Bank.
We want to expand our activities in Russia, but the shortage of information and the discrepancy between the accounting and reporting systems of Russian enterprises and the world standards are obstacles to this.
Another problem is an imperfect system of re-registration of shares. But we hope that this problem will be solved as registrars get government licensing.
Regent Pacific is one of the most prolific companies in Russia.
Julian Mayo, director of one of the funds of the Regent Pacific Corporate Finance Ltd:
- In comparison with other countries where we invest, Russia is the best place and our investors are very grateful to us.
We want to continue and increase our investments in Russia. The new investors want to invest in the "blue counters", while the old ones invest in shares with a high potential for growth. The Russian economy is growing, inflation is going down - so why shouldn't we invest?
We can be stopped only if Russia stops the process of reforms and market economy.
As for the problems with the re-registration this process is even more complicated in India or Indonesia than in Russia.
"Troika Dialog" is a managing company of the American mutual fund Lexington Troika Dialog Russia Fund. It was officially opened on July 3 last year, but it did not get into Table 2 only due to its young age. It is the only American fund managed by a Russian company.
In the first quarter of this year it became the second in profitability among all American mutual funds.
Says Gor Nakhapetyan, executive director of "Troika Dialog".
The price of the share at the moment of distribution was 10 dollars, now it has reached almost 16 dollars. Besides, there are pleasant developments on the market itself.
The risk of investments is going down You won't find a register now which would cross out a share-holder without batting an eye-lid. The market is expanding, and we can speak now about dividing it into echelons.
Dialogues with the heads of enterprises are possible now, they are not hostile to investors as before, investors are welcome there now.
As for the expansion, we can well understand that the Russian market is not yet ready for big sums and can hardly digest even 200-300 million dollars. This limitation is mainly due to an imperfect market infrastructure.