A new emerging market equity hedge fund which aims to tap into the growth and
investment potential of Russia and neighbouring states formerly belonging to
the Soviet Union is set to be launched next month.
The Greater Europe Deep Value Fund, a closed-end fund registered in Jersey
and listed on the Irish Stock Exchange, will have a lock-up period of three
years, allowing the fund's managers to make investments in illiquid but potentially
highly profitable stocks.
The fund is scheduled to open in May and close in June of this year.
According to Jochen Wermuth of Wermuth Asset Management, a German investment
boutique which is acting as advisor to the fund, Russia's economic growth potential
has been underestimated, and he believes that in the long-term, Russia's economic
prospects look stronger than those of developed countries such as the United
States.
"Gross domestic product growth in dollar terms -- around $3,000 per head
-- may well triple over the coming five years due to real growth, high wage
inflation and a stable exchange rate," Wermuth told Reuters.
He added that earnings of companies focused on the domestic consumer market
are also expected to triple, while strong demand for Russia's abundant natural
resources from emerging economies such as China and India will keep commodity
prices high. This will also benefit the economies of states such as Kazakhstan,
where the fund will also be making opportunistic investments.
The fund will also explore opportunities provided by private equity, takeovers,
restructuring finance, shareholder activism and initial public offerings, according
to Reuters.
The Deep Value fund will charge a management fee of 2% plus a performance fee
of 25% of the profits, but only if 10% is returned on top investors' initial
capital every year.
The Greater Europe Deep Value Fund is a spin off from the Greater Europe Fund
Limited, which has returned 37.74% annually since its launch seven years ago.
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