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New strength attracts interest
Published: 01 August, 2007
Gold rush
Kazakhstan is suddenly hot as investors want to diversify out of Russia and at the same time are tempted by the ballooning Kazakh economy. A slew of funds have launched this year to allow investors to get some exposure to central Asia and more sophisticated products are in the works.
“A gold rush has started,” says Michael Sauer, CEO of Visor Capital, Kazkhstan’s first domestic investment bank, which was set up in 2005. “Every week we are seeing two or four [international] clients coming down to take a look around. We take them out to meetings and I am sure the volume on the [Kazakh Stock Exchange] has doubled in just the past three months. At the same time there is more private equity action and more mergers and acquisitions.”
Sweden-based East Capital got the ball rolling in February when it raised $100m with its Central Asia and the Caucasus Fund, which closed almost as soon as it started accepting investments. “We closed the fund almost immediately because demand was so great,” says Aivaras Abromavicius, partner of East Capital and manager of the East Capital Bering Central Asia Fund, which is up 8% since its inception at the end of February. “Those who made good money in the Baltics and Ukraine are looking for the next big thing.”
Likewise, Visor Capital’s asset management arm, Compass Capital, quickly raised about $350m with the launch of two offshore funds, one of which was floated on London’s Alternative Investment Market in April. Compass hopes to raise another $300m, with a third fund targeting European investors that is due to close in December.
And Russia’s leading investment bank, Renaissance Capital, is in the middle of setting up a full service investment bank to cater to the growing international demand for exposure to the region and plans to offer investors “the entire gamut of services”, says its new CEO, Alexander Pertsovsky.
Adel Kambar, who was hired from Morgan Stanley in April to head Renaissance Capital’s central Asian operation, says: “It’s amazing that you have a $100bn economy and total population of about 80 million in central Asia, and yet there is not one proper investment bank in the entire region.”
Part of the interest in the region is the fact that Russia, the traditional focus of international investors in the region, is doing so badly this year. After nearly doubling every year for the past three years, the Russian stock market was up less than 15% by the end of June since the beginning of 2007. And investors are worried by the increasingly belligerent rhetoric flying between Moscow and Washington. Many have decided it is a good time to diversify their portfolios.