www.ufgam.com

The Firm

United Financial Group Asset Management (UFG AM) is an independent investment management group focusing on the capital markets of the Russian Federation. The company was founded in 2002 and has over US$1.6bn in assets under management providing professional asset management services for both onshore and offshore investors.

UFG AM was originally set up by a group of investment professionals and senior partners of United Financial Group, which grew to become Russia's leading investment bank. UFG sold its brokerage and investment banking divisions to Deutsche Bank in 2005 which is now called Deutsche Securities, and retained full ownership of UFG AM.

The company offers both absolute return and traditional investment strategies through a family of offshore funds, domestic retail mutual funds and segregated accounts. The team of investment and business professionals has exceptional track records and aspires to excellence, not only in outperforming their peers and benchmarks but also in controlling risk.

Structure

UFG AM combines two legal entities: UFG Advisors and UFG Invest. UFG Advisors is a company incorporated under the laws of Bermuda and advises all of the offshore funds and segregated accounts. Offshore funds are Cayman Islands companies and are denominated in US dollars.

UFG Advisors owns 100% of UFG Invest, which is the Moscow-based company that advises all onshore funds and segregated accounts for onshore investors. UFG Invest is licensed by the Russian Federal Financial Markets Service to provide a full range of fund management services.

The client base of the firm includes Institutional Investors, Fund of Funds, Family Offices and High Net Worth Individuals. Geographically, UFG AM clients are based in the UK, Continental Europe, Russia and the United States.

Strengths

The UFG AM investment team brings a unique combination of proven Russian and Western asset management expertise combined with superior research and investment analytic capabilities. The team is comprised of experienced fund management and business professionals with backgrounds in portfolio management, global financial markets, research and direct investments. In addition, the company has experienced teams managing private equity and real estate portfolios.

Approach

The investment management philosophy is research intensive, focusing on Russia and the Russian market in general, followed by extensive research on specific investment opportunities. The Manager undertakes multiple company visits to implement its bottom-up approach to investments and draws predominately on proprietary research and analysis. The criteria for selection of investments include such factors as: attractiveness of the valuation, prospects for capital appreciation, historical performance, competitive position of the company, the attitude of management towards investors and towards company development, and the availability of financial information.

According to Florian Fenner, CIO of UFG AM: “In today’s market, you need a skilled manager with on the ground research capabilities. In the past, the rising tide lifted all boats: Since valuations were so low for almost all assets in Russia, stock selection was only of secondary importance, the key was to have significant exposure”

For full version of the editorial by Florian Fenner “ Russia Gets the Fully functioning Stock Market it Deserves” please see the latest 2007 AIR publication with special focus on Russia/Emerging Markets.

Investment Opportunities Abound:

Following the dramatic rise of the Russian market and almost uninterrupted, stellar performance over the last couple of years, one might assume that investment opportunity is over. While it is indeed true that the easy money making proposition of buying into mainly Soviet era commodity assets is gone, the real investment opportunity is just about to start. Even though Russia’s GDP at around $1,200bn this year is about six times higher in nominal USD than in 1999, in real terms GDP is just back to levels seen before the Soviet collapse. Thus, it is only logical that Russia is capitalizing on a commodity boom during which - to the surprise of many - the oil wealth was not squandered but prudently used to pay off practically all debt and produce uninterrupted budget surpluses since 1999. In short Russia has become one of the safest countries to invest in: With $450bn of reserves and no public and very limited private debt, Russia will not be affected by the global credit crunch. Moreover, trade with the US is less than 2% of GDP, a remarkable contrast to the Asian Tigers, which are extremely dependent on US imports for growth. The country is now about to embark on an investment and consumption driven boom that is akin only to what is currently happening in Asia, a trend which is broadly recognized by the investment community, but almost entire overlooked as far as Russia is concerned.

Over the next 10 years about $1,000bn will be spent to basically “retool” the whole country, mainly dealing with a completely dilapidated social and industrial infrastructure. To investors the path to outsized returns is therefore to stay clear of sectors that are fraught with political risk, mainly oil and some strategic enterprises, such as defense, and to invest in domestic consumption and infrastructure plays, such as steel, construction and machinery and consumer related plays, such as retailers, telecommunications and banking. Since Russia is one of the most unloved and “under-owned” markets in the world, one enters at valuation levels that are at significant discounts to emerging market peers in absolute and relative terms. The country’s animal should be a bull, but not a bear.

Russia is from a macro point of view not only one of the safest countries to invest in, but also one of the fastest growing economies in the world.

Offshore funds:

UFG Russia Select Fund

UFG Russia Select Fund Ltd. launched in December 2002, is a flagship product of the firm. The fund aims to achieve long-term capital growth, primarily through investment in equities actively traded in markets of the Russian Federation. The fund provides risk-adjusted returns and demonstrates ability to perform in all markets. The fund minimizes hedging costs by employing strategies which are deemed most suitable to varying market conditions.

In 2003 and 2004, the fund was ranked among top performing Emerging Markets Funds and was nominated as one of the finalists for the Hedge Funds Review European Performance Awards in 2005 in the New Funds category. In January 2005, UFG Russia Select was ranked as a Top Ten Hedge Fund in Emerging Markets-Emerging Europe Past 3 Years Category by Barclay Managed Funds Report. UFG Russia Select was also short-listed for the Best Emerging-Markets Single-Manager Fund in Hedge Funds Review 2006. In February 2007, UFG Russia Select Fund was named the EuroHedge Emerging Market Fund of the Year. Since launch the fund delivered a total rate of return of 476.8% through October, 2007

UFG Russia Select Fund Net Performance vs. MSCI

 

UFG Russia Alternative Fund

In November 2006, UFG Advisors launched UFG Russia Alternative fund with the aim to achieve long-term capital growth by investing in less liquid securities, not actively traded in the markets of the Russian Federation and in equity securities with no official listing but with significant share price appreciation potential. Since launch, the fund delivered a total rate of return of 48.84% through October, 2007. Specifically, the fund invests in stocks that are already traded locally and that then conduct secondary IPOs with a significant premium to the local market thus creating an arbitrage opportunity for the fund. “While liquidity, or the lack thereof, is a particular risk in emerging markets, the opportunity for the judicious investor is extraordinary”, Florian Fenner, CIO of the fund said.

UFG Russia Debt Fund

In January 2005, UFG Advisors launched UFG Russia Debt fund with the aim to explore opportunities in Russian rouble fixed income. The investment objective of the Fund is to achieve above average fixed income returns, primarily through investments in debt instruments issued by corporations domiciled in the Russia. Approximately, 70% of the portfolio is invested in Rouble-denominated corporate bonds with an average duration of less than two years, and an average yield to maturity of about 11.0% in Rouble terms. The rest of the portfolio is invested in Russian corporate Eurobonds with an average duration of less than four years and an average yield to maturity of about 8%. Since launch the fund has delivered a total rate of return of 34.05% through October 2007.

UFG Real Estate

UFG Real Estate Fund I, L.P. was successfully launched in July 2007 with a committed capital of US$130 million.

In November 2007, UFG AM announced the launch of the next UFG Real Estate Fund II, L.P.

The Fund’s targeted equity capital is US$300 million with the expected program life of 8 years. The first closing is scheduled for March 2008. The Fund will pursue the successful investment strategy of Fund I by creating a land bank, industrial parks and institutional product of international quality with clear tax and ownership structure in Russia.

UFG AM major advantages are in the:

• Incomparable access to real estate investment opportunities in Russia
• Combination of western expertise and connections in the business and government circles
• Our reputation of a serious investor who can execute in a timely manner, and
• Sole focus on acquiring and enhancing properties for value realization and generating superior returns for investors.

UFG AM believes that hugely compelling valuations continue to underpin the real estate sector as a great haven of value in Russia thanks to the construction and infrastructure boom similar to what Western economies experienced in the 60’s and 70’s and the growing interest in the Russian real estate on behalf of international investors versus the lack of the product available.

For further details please refer to: www.ufgam.com

UFG Private Equity

UFG Private Equity Fund I, L.P. was launched in November 2005 and now works with the most promising investment projects in Russia and the CIS. The fund was closed in June 2006 with the total aggregate commitments of US$280 million. The Fund is not restricted to investing in a certain industry, but focuses rather on the access to deals and current opportunities available in the marketplace. The Fund’s portfolio consists of significant stakes in expanding companies with considerable potential for further development.

The Fund’s Senior Managing Partner is Boris G. Fedorov, a prominent Russian public figure and economist. He established the United Financial Group in 1994, which grew to become Russia’s largest investment bank (sold to Deutsche Bank in 2005). The Fund’s other partners are international private and institutional investors.

Contact:
Olga Kravchenko
Tel: + 7 495 721 12 12
Fax: + 7 495 721 12 10
E-mail: OKravchenko@ufgam.com
Website: www.ufgam.com

Postal address:
UFG Asset Management
5,Petrovka str.,107031,
Moscow, Russia

 

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