Various listed Russian-focused funds in the process of winding up, often under pressure from shareholder activists, could make investors who bought their shares earlier this month 25% or more by the time they have returned capital, according to Jefferies.
Jefferies works on the basis ECFI needs until mid-2014 to exit and return proceeds of its stake in Bank of Georgia and all its Russian banks, excluding Probusinessbank, with the rest of the portfolio then returned in January 2016. “Using what we believe are conservative assumptions, the current share price would give an IRR of 26.4% over the remaining life of the fund, which we think is attractive.”
Renaissance Russia Infrastructure Equities fund offers the next-best IRR for its shareholders, of 25.2% by the time it finishes its restructuring, according to calculations by Jefferies.
RIEL was launched in 2007 as an offshore fund, and later listed in Guernsey, then transferred to the main board of the London Stock Exchange.
In July 2012, the fund announced a proposed restructuring whereby its liquid assets would be transferred to an open-ended Ucits scheme, whilst illiquid assets it held would be retained by the fund, and be realised “in an orderly manner” over time.
In August the fund announced plans to provide an interim in-specie distribution of Ucits fund units, representing 30% of RIEL’s NAV, by mid-December.
The fund is in the process of exiting its illiquid holdings – planned for mid-2013 – and increasing liquidity of the overall portfolio. About one third of the current NAV is in cash or liquid funds, according to Jefferies estimates.
By mid-year the largest sub-sectors in the portfolio were transport (20.2%), construction (14.4%) and real estate development (14.1%), with about 35% of the portfolio in a less-liquid ‘tail’ of small cap listed stocks, and a minimal portion in unlisted equity.
TAU Capital, a fund investing in public and private equity in Russia and central Asia, offers the most meagre projected IRR, of 5.5%, by the time it follows the views of a large shareholder and realises its assets as cash.
The fund is 49.9% of public equity (of which about 90% is believed to be liquid), 27.1% in private equity and 23% in cash.
In May LIM Asia Multi-Strategy Fund, which held over 10% of TAU’s shares, requested an EGM to consider realising all investments and returning cash promptly to shareholders, and reviewing the investment management arrangements.
At the AGM, these proposals were agreed, meaning that from the pending appointment of a new manager, TAU’s board expects the liquid, listed equity portion of the portfolio to be sold within three months, and the illiquid portion to be sold within six months, at the latest. The private equity allocation should then be exited within 12 to 24 months. Cash will flow back to investors along the way.