East Capital sees opportunities in Russian domestic growth
East Capital has launched a fund targeting Russian domestic growth. The fund is expected to have its first closing towards the end of this month.
East Capital Explorer AB, a Luxembourg domiciled investment subsidiary investing mainly in East Capital’s alternative funds, has committed €15m to the first closing of the fund.
Aivaras Abromavicius, partner and senior adviser at East Capital (pictured), said: “Under current market conditions there are good investment opportunities in a number of companies with exposure to the growth of the domestic economy sectors in Russia.”
While many core European economies are shrinking as a result of the debt crisis, Russia’s GDP continues growing. The IMF forecasts 4% growth for the remainder of the year, but does not exclude the possibility that this figure might reach 6% if the Kremlin implements its promised structural reforms.
Apart from this, unemployment, inflation and interest rates in the country are at record lows and wages have risen rapidly. As a result, domestic consumption has been particularly strong.
The East Capital Russia Domestic Growth fund aims to profit from this consumption story. “Companies focusing on the domestic market have outperformed export-oriented stocks that are dependent on global demand,” Abromavicius said.
The fund will invest across all sectors of the economy in securities that are believed to be undervalued, with significant performance potential. The aim is to create a concentrated portfolio of 10-20 listed companies with a market capitalisation above $500m, which together generate at least half of the revenue in Russia.
East Capital specialises in the emerging markets of Eastern Europe and China. It actively manages €3.5bn in public and private equity and real estate. It is headquartered in Stockholm, with offices in Hong Kong, Kyiv, Moscow, Oslo, Paris, Shanghai and Tallinn.