Seeking high returns in the early days of Russia's conversion to capitalism, two funds are being launched to invest in Russian stocks.
The potential for high returns is staggering: Russian stocks are the most undervalued in the world, said Jim Mellon, managing director for Regent Fund Management, Hong Kong. He projects share prices will quintuple in the next three years.
Regent will launch the White Tiger Investment Co. Ltd. in September with an initial capitalization of $20 million, 10% of which will be put up by the firm.
Meanwhile, Fleming Investment Management Ltd., London, plans to launch a $50 million fund to invest in stocks of newly privatized Russian companies. The fund is expected to be placed by the end of August, but is not being marketed to U.S. investors.
Both funds will be listed on the Dublin Stock Exchange. Closed with the possibility of becoming open, each - at least initially - will be invested in big Russian infrastructure and natural resources stocks, such as Surgetneftegas, Lukoil, Unified Energy System and Rostelekom.
But this is where the two funds part company. The Fleming fund, in its second stage, likely will move into consumer goods and services and construction stocks. The White Tiger fund will have more of a Far Eastern bias.
Fleming has been making direct investments for several years in Russian companies, Regent executives are new to the area.
With refreshing candor, Mr. Mellon said his firm's executives are not experts on Russian stocks. "We want to be there before the emerging market crowd rushes to Russia," he said.
To reassure investors, if White Tiger cannot invest two-thirds of the money within six months, the company will be liquidated and assets returned to shareholders.