The first money market-style fund to invest in Baltic republic cash instruments has been launched by Structured Investment Engineering Ltd., London.
The open-ended Baltic Cash Fund is expected to raise about $40 million from institutional investors and wealthy private clients. It will invest primarily in short-dated Treasury bills and certificates of deposit issued by leading Latvian and Lithuanian banks.
The high interest rates afforded by such instruments - as high as 25% - reflect the shortage of hard currency needed to lend to local businesses, said Aigar Sevels, chief executive officer of Baltic Asset Management Ltd., the money management arm of International Bank of Riga, which commissioned Structured Investment Engineering to design the fund.
Investments initially will be 80% invested in U.S. dollar-denominated instruments to reduce currency risk. On a simulated basis, the strategy would have generated a return of more than 18% per year in U.S. dollars since January 1993. Investors will be able to withdraw their money with 30 days' notice.