Artradis Fund Management Pte Ltd., a Singapore-based hedge fund with $1 bln of assets, will invest in infrastructure in Russia and other former Soviet states, where transport and power networks have failed to keep pace with economic growth.
The month-old Artradis Russia Opportunities Fund, has $14 million under management and aims to raise $100 million initially, said Managing Director Stephen Diggle. Unlike most Russian funds, which focus on oil and gas companies, Artradis will target infrastructure, consumer and consumer finance stocks, he said. „The country's infrastructure is starting to creak given the shortages in power and housing,” Diggle said by phone from Singapore. „There's desperate need to rebuild roads and pipelines. We see significant opportunities away from where most people focus.”
Russia's dollar-denominated RTS index surged 71% last year as record-high oil prices boosted earnings of energy companies, which make up more than half the benchmark. Russia's revenue from selling oil and gas to other nations has fueled incomes among the country's 143 million people, allowing them to spend more on consumer goods and services. „As the petro-dollars come into the economy, the average Russian has gotten a lot better off,” Bill Browder, who oversees $3.25 billion in Russia at Hermitage Capital Management Inc., said in an interview last month. „You're seeing people buying mobile phones, people buying apartments. At this point in time, the thing to bet on is the Russian consumer.”
Hedge funds are loosely regulated private pools of capital which allow managers to partake in gains. Globally, about 80 of them invest in Russia and Eastern Europe, managing a combined $14 billion, according to Singapore-based Eurekahedge, which tracks the industry. At the end of 2004, there were 50 such funds overseeing $4.2 billion. The Artradis fund will also invest in the other 11 countries of the Commonwealth of Independent States.
It bought securities in Ukraine and is looking at opportunities in Kazakhstan, Diggle said. The Commonwealth of Independent States was formed in 1991 after the dissolution of the Soviet Union. The bloc's economies on average expanded 7.5% last year, according to the group. Russia, the biggest economy in the CIS, grew 6.7% and Ukraine expanded 7%. Martin Diggle, Stephen's is based in Moscow and is in charge of identifying investment opportunities.
The fund will adopt an „aggressive” approach, buying stocks of small companies and concentrating on a few investments, Martin Diggle said. It will use options and credit derivatives to hedge risks, he added. Martin Diggle previously worked as an equity sales partner until 2003 at Brunswick, an investment bank which was bought by UBS AG in 2004. (Bloomberg)