The billionaire capital of the world, Moscow, Europe’s largest city, wants to establish itself as a financial hub, despite loud calls that Russia is a ‘bad investment.’ Much attention is paid to Moscow’s billionaires as financial circles watch with intrigue as football clubs, Greek islands, and New York penthouses are bought up by Russia’s new class of wealth.
Hedge funds first arrived in Moscow alongside the explosion of the Russian stock market in 2005-06, but the Western-managed firms, without specific exposure to the local market, didn’t emerge as hedge funds, but rather extra-big mutual funds.
‘All roads lead to Moscow’ doesn’t seem to explain why Russia’s richest and wealthiest are buying assets abroad, and why several Moscow-based investment funds were forced to pack up their bags because the investment climate wasn’t spurring the profits minority shareholders expected.
CEO and co-founder George Ivanyan explained the Cayman-based EPFC Asset Management Group both manages portfolios and provides ‘native’ consulting for start-ups and investors in the Russian market.
Currency swaps in rubles and Russian OFZ government bonds, or carry trades, are proving more attractive for Western hedge funds because of the considerable difference in US and Russian rates, which are about 600 basis points, or 6 percent.
New York, London, Singapore, Zurich, and Dubai are capital and asset management destinations for Russia’s billionaire “offshore oligarchs.” Europe Finance is providing a niche market for Russia’s ultra-rich who have ‘failed’ outside of Russia in real estate, metals, or paying too much for expensive hedge fund advice.
The market cap of the Moscow Exchange is shy of $1 trillion, a small fraction compared to New York’s $13.4 trillion, Tokyo’s $3.8 trillion, London’s $3.6 trillion, or even Bombay, India’s $1.6 trillion.
VTB Asset Management, a leading Moscow-based investment group, manages close to $190 billion in assets, and already operates internationally in London, New York, Dubai, and Hong Kong.