Troika Dialog, Russia’s oldest brokerage, seeks to increase assets under management 10-fold within five years by courting the country’s growing middle class and foreign investors.
“In terms of size, asset management and private banking is going to change fundamentally in the next five years.” Jacques Der Megreditchian, Troika’s chief business officer, said in an interview. “We currently have $3 billion under management. In three to five years we aim to have $30 billion.”
Troika Chairman Ruben Vardanian said July 23 he plans to leave the Moscow-based brokerage in three to five years and will offer his 40 percent stake to management. Der Megreditchian, who proposed the management buyout, is the leading internal candidate to take over the company, Vardanian said.
Troika’s asset management business, mainly focused on local institutions and individuals, is set to grow as more Russians invest in financial markets, Der Megreditchian said. Troika also aims to attract more money from overseas investors, starting with institutional clients.
“It’s on the emerging markets where you see the growth,” he said. “There’s definitely some appetite to be strong in these markets.”
Russia’s economy is recovering from its biggest contraction on record as higher commodities prices and increased consumer spending fuel growth. The economy may expand 4.4 percent this year, more than the official government forecast, Prime Minister Vladimir Putin said Sept. 17 in Sochi, Russia, where the government sponsored an investment conference. Disposable incomes jumped 7.9 percent in August, the most in seven months.
Russia has almost 1 million “mass affluent” people, those with investable wealth of 1.3 million rubles ($41,000) to 13 million rubles, and their ranks will increase by as much as 5.5 percent annually over the next five years, Citigroup Inc. and the New Economic School said in an April report.
While almost 70 percent of these people “keep most of their wealth” in bank deposits, they are becoming “more active in managing their investments,” according to the report.
Asset management and private banking are “going to be important for us,” Der Megreditchian said.
Troika is in the process of hiring a specialist to lead the firm’s private banking business, Der Megreditchian said, declining to identify the person. The banker will join Troika at the end of this month, he said.
Troika, which is on the short list to advise the Russian government on some asset sales, may generate “additional profitability” by offering new investment products, he said.
The investment bank “will continue earning most of its money in global market activities, which account for around 60 percent of our revenues,” Der Megreditchian said. “There is room for a lot of new instruments.”
There is demand for new products to help companies hedge credit risk in Russia, he said.
“You don’t have futures, you don’t have CDS’s on the local market,” and commodities futures and bets on the three-month London interbank offered rate are also missing, he said. “Not very complicated” products will expand in coming years.
“The Russian market is still young,” he said. “I think this will be a plus for a bank like ours.”
Should a management buyout of Troika fail, Vardanian said another option would be to offer his stake to state-controlled lenders OAO Sberbank and VTB Group, along with Johannesburg-based Standard Bank Group Ltd., which owns 36 percent of the company.
“There is no urgency. We will survey all the possibilities and make a decision based on the environment and our own preferences,” Der Megreditchian said. “Personally, I like independence.”