A new emerging market equity hedge fund which aims to tap into the growth and investment potential of Russia and neighbouring states formerly belonging to the Soviet Union is set to be launched next month.
The Greater Europe Deep Value Fund, a closed-end fund registered in Jersey and listed on the Irish Stock Exchange, will have a lock-up period of three years, allowing the fund's managers to make investments in illiquid but potentially highly profitable stocks.
The fund is scheduled to open in May and close in June of this year.
According to Jochen Wermuth of Wermuth Asset Management, a German investment boutique which is acting as advisor to the fund, Russia's economic growth potential has been underestimated, and he believes that in the long-term, Russia's economic prospects look stronger than those of developed countries such as the United States.
"Gross domestic product growth in dollar terms -- around $3,000 per head -- may well triple over the coming five years due to real growth, high wage inflation and a stable exchange rate," Wermuth told Reuters.
He added that earnings of companies focused on the domestic consumer market are also expected to triple, while strong demand for Russia's abundant natural resources from emerging economies such as China and India will keep commodity prices high. This will also benefit the economies of states such as Kazakhstan, where the fund will also be making opportunistic investments.
The fund will also explore opportunities provided by private equity, takeovers, restructuring finance, shareholder activism and initial public offerings, according to Reuters.
The Deep Value fund will charge a management fee of 2% plus a performance fee of 25% of the profits, but only if 10% is returned on top investors' initial capital every year.
The Greater Europe Deep Value Fund is a spin off from the Greater Europe Fund Limited, which has returned 37.74% annually since its launch seven years ago.
A comprehensive report in our Intelligence Report series examining offshore investment, offshore stock exchanges, and hedge funds is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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