Global investors including BlackRock Inc. (BLK) are gathering in Moscow as firms seek to balance opportunities in Russia against the threat of fresh sanctions over the conflict in Ukraine.
BlackRock, the world’s largest money manager, will be represented at Renaissance Capital Ltd.’s annual investment forum that opens today in the Russian capital, according to people with knowledge of the matter. The conference, once known for its champagne and caviar dinners and celebrity speakers, will also include investors from RBC Global Asset Management Inc., Utah-based Wasatch Advisors Inc. and Swiss wealth manager Union Bancaire Privee, among others.
Russia’s annexation of Crimea and the U.S. and European Union sanctions that followed led Sberbank CIB, the investment-banking unit of Russia’s largest lender, and state-controlled VTB Capital to call off April investor conferences in Moscow and New York. Top executives from Goldman Sachs (GS), Citigroup Inc. (C) and Morgan Stanley (MS) opted out of Russian President Vladimir Putin’s annual economic forum last month.
Coupled with a 20 percent gain in Russian stocks since their March 14 low and a rebound in cash inflows from foreign investors, the participation of North American and European companies at RenCap’s conference shows investors’ interest in maintaining good relations inside Russia even as they weigh the risks of additional sanctions.
“With both VTB and Sberbank canceling their events, it’s good that RenCap has organized something,” Pavel Laberko, fund manager at Union Bancaire Privee in London, said in an interview near the investor forum. “Some investors may still see risks of more sanctions because the new peace plan is not strictly adhered to by the parties, as it seems.”
Investors sold Russian stocks as Putin moved to annex the Black Sea Crimean peninsula, pushing the benchmark Micex Index (EMERMCX) down 13 percent in the first four months of this year and leaving Russian equities at their cheapest versus the MSCI Emerging Market Index since 2008. Investment banks in Moscow led by VTB Capital, Sberbank CIB and JPMorgan Chase & Co. (JPM) saw a 69 percent slide in fees this year as the Ukraine crisis led to the closing of the equity-capital and foreign-debt markets for Russian companies.
“As long-term investors, we have not had a notable positive change in sentiment so we haven’t increased our exposure,” Andrey Kutuzov, a fund manager at Wasatch who said he would fly to Moscow for the RenCap event, said in an e-mail. “The reaction to the Ukraine crisis only intensified this concern as the sanctions make it hard to see Russia moving to a more private capital friendly, reform-oriented environment.”
Of 93 global equity indexes, only Argentina and Brazil have performed better than Russia’s 50-company Micex (INDEXCF) over the past three months, according to data compiled by Bloomberg. Net inflows from U.S.-based exchange traded funds surged to $152.5 million last month, 12 times the April total, the data show.
RenCap, the Russian investment bank controlled by billionaire Mikhail Prokhorov, is bringing 30 of its biggest clients to Moscow to meet companies at its annual conference, said David Nangle, global head of research. Russian companies presenting will include OAO Magnit (MGNT), Yandex NV (YNDX), Moscow Exchange, TCS Group Inc. (TCS), Sberbank and VTB, he said.
The 18th annual edition will be more spartan than the days when co-founder Stephen Jennings spent lavishly for keynote speakers like Bill Clinton, Tony Blair and Henry Kissinger. In 1998, before Russia defaulted on its debt, RenCap held an event for investors at the 18th-century Kuskovo Palace near Moscow and flew in a U.S. jet-ski team to perform stunts on the estate’s lake. These days the press is excluded and spending has been scaled back.
More than 200 people including about 50 global investors will attend the five-day conference, RenCap said in a statement today. A RenCap spokesman, Anton Trifonov, declined to identify the investors, saying it was a matter for the clients.
A representative for New York-based BlackRock, which has $4.4 trillion under management, declined to comment on the forum. Spokesmen for RBC, which oversees $305 billion for Canada’s largest bank, Geneva-based Union Bancaire and Wasatch, said their firms would be represented.
“RenCap has got the timing right,” Chris Weafer, a founder of Macro Advisory and former chief strategist at Sberbank CIB, said in an e-mail. “The VTB and Sberbank events were scheduled when the perception of Russia risk was very high. Today, the situation is markedly improved.”
Citigroup, which gets about half its revenue from emerging markets, said about 10 clients came to a three-day conference last week that featured presentations from telecommunications and media companies such as Mail.ru Group Ltd. (MAIL), Yandex and OAO Rostelecom.
“Russia is surprisingly a hotspot,” Alexei Bolshakov, Citigroup’s head of equities in Moscow, said by phone. “I have seen more interest in Russia from non-dedicated U.S. accounts over the last three months than in the past three years.”
Morgan Stanley also held a four-day investor event last week in Moscow, attracting Schroder Investment Management Ltd., Lazard Asset Management Ltd. and Charlemagne Capital Ltd. (CCAP), according to three people who attended. Hugh Fraser, a Morgan Stanley spokesman in London, declined to comment.
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