Prosperity Capital to launch Lux Ucits Russia fund
Prosperity Capital Management is planning to launch a Luxembourg-domiciled Ucits-compliant equity fund investing in Russia. The details of the launch have not yet been finalised, but legal permission is expected soon.
This is not the first Ucits-compliant fund launched by the firm. The Russian Prosperity Euro fund, launched in March 2000, is Ucits III-compliant but domiciled in Finland. But many investors are more accustomed to Luxembourg-domiciled funds, said founding partner Mattias Westman. “There is no problem with being domiciled in Finland, but we want to have both options on offer,” he explained.
With the Association of the Luxembourg Fund Industry (ALFI) pushing coverage of Luxembourg in the global media and arranging regular conferences, Luxembourg is becoming better known as an investment fund jurisdiction and therefore more appealing to many investors. ALFI has been particularly active at promoting Luxembourg as a domicile for UCITS-compliant funds and keeping the industry informed of the associated regulatory requirements.
Prosperity Capital Management is the largest Russia-focused asset manager in the world, with around $4bn in assets under management. Its flagship fund, Russia Prosperity A, has had the best performance among its peer group, returning 98.46% over the past 3 years. This is over 25% more than the next fund in the category, Trigon Russia Top Picks Fund B Unit, whose total return over the same period is 72.9%.
Westman attributes this success to the investment approach. Instead of focusing on the macroeconomic picture, which is often the case with Russia-focused managers, Prosperity addresses the micro situation within the companies whose shares it invests in.
The important questions are how the company is developing, what the quality of its management team is and whether any ownership changes have taken place in recent past. “We take an active shareholder approach—we hold large stakes in companies and try to be in close contact with the management team and to improve corporate governance,” Westman said.
Westman believes this approach has allowed the investment team to avoid risk and gain better returns. “Over the last 3 years coming out of the crisis, some of these better-run companies did comparatively better than others because they were not overleveraged,” he explained.
The firm does not take a specific sector view when choosing which stocks to invest in, but it is careful to keep state-run companies at a low proportion of the portfolio. These comprise only 20% of the total holdings, against an MSCI Index weighting of around 60% for Russia. Westman also said that some of the domestically oriented companies are better-run than the large global exporters and therefore offer better investment potential.