Renaissance plans to make infra fund Ucits compliant

Renaissance Asset Managers is planning to give its Russia Infrastructure Equities Limited (REIL) fund a Ucits-compliant structure, transferring most of the portfolio to a newly incorporated open-ended Ucits scheme.

The new structure is set to improve the fund’s liquidity profile and reduce the discount to net asset value (NAV) per share at which it currently trades.

Chairman David Clark said: “There remains significant potential for Russian infrastructure investment to deliver superior returns. However, in the current market conditions, the existing structure does not provide the best vehicle for ensuring shareholders benefit fully from the value creation we are seeing.”

The Russian government is planning to increase spending on infrastructure projects, fuelled in part by the upcoming 2014 Winter Olympics in Sochi and the 2018 FIFA World Cup.

President Vladimir Putin said that even the most bearish scenario in the Transport Policy envisages spending of $5.4trn on transport infrastructure over the next 20 years. By 2015, more than RUB1.1trn ($37bn) will be spent on roads and railways and over RUB300bn on upgrading airports.

The opportunities in the infrastructure sector are becoming evident to many foreign managers investing in Russia through funds. JPMorgan Asset Management’s Russia fund is also bullish on infrastructure. The sector is not affected by commodity cycles, unlike much of Russia’s economy, and tends to have a strong growth potential.

But many investors prefer to invest through regulated vehicles, such as Ucits funds. Apart from higher liquidity, a Ucits framework offers better transparency to shareholders, which is particularly important in a country like Russia, with often hazy corporate governance structures.

 

Currently the REIL fund is managed in the form of a closed-ended investment vehicle, domiciled in Guernsey. It is expected that the Ucits fund will be registered in Luxembourg, but official approval has not yet been granted. The vehicle will have at least twice monthly liquidity.

The assets that cannot be transferred to the Ucits structure – primarily illiquid holdings – will be restructured subject to the approval at a shareholder’s meeting in October. The assets derived from this restructuring will most likely be used to purchase additional shares in the Ucits vehicle.

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