Five Rings Foundation

The management company of the Bank of Moscow wants to create an “Olympic” mutual fund

The opportunity to make money at the 2014 Sochi Olympics excites the minds of not only builders, hoteliers and bankers, but also management companies. General Director of the Management Company of the Bank of Moscow, Elena Kasyanova, recently said that this fall the company plans to create a new mutual fund focused on shares of companies that will benefit from the pre-Olympic boom. Competitors appreciated the courage and timeliness of the idea, but are not yet in a hurry to follow suit - there are very few companies operating in Sochi whose shares are traded on the stock exchange and can greatly increase in price precisely in connection with the upcoming Olympics.

Ms. Kasyanova said at a press conference in Vyborg: “In the fall, we plan to create a fund focused on investing in shares of companies that will benefit most from the expansion of investment demand in the economy.” Particular attention, according to her, will be paid to companies operating in the Southern Federal District and with prospects for business expansion in connection with preparations for the Olympics in Sochi.

According to Bank of Moscow analysts, in 2007 there was a sharp increase in investment, which exceeded 20% in annual terms. “We believe that investment activity will increase. The main industries that will benefit from the expansion of investment demand will be metallurgy, construction, electric power, the cement industry, and the production of building materials. These industries will grow more dynamically than the market,” believes Kirill Tremasov, director of the analytical department of the Bank of Moscow.

Fellow managers had not yet heard of similar ideas and appreciated the originality of the Bank of Moscow Management Company, but drew attention to the possible disadvantages of such a fund. “The idea is interesting, but it is unclear how long-lasting it can be. It is necessary that the shares of companies included in the fund show better performance than shares of companies from the same sector that are not included in the fund. But this may not happen,” says First Deputy General Director of Alfa Capital Management Company Alexey Tukhkur.

“Managers will have to actively buy shares in this fund, and most likely most companies will not be directly connected with Sochi or have a significant share of business there,” believes Vladimir Solodukhin, managing director of BKS Management Company. He noted that many of the companies that could benefit from the pre-Olympic excitement in Sochi are not public, and those that are are not very actively traded. For example, this can be said about developers who stand to gain the most from the upcoming Olympics (perhaps the most famous developer operating in Sochi, whose shares are listed on stock exchanges, is Sistema-Hals, but in Russia there are almost no shares of it on free sale ).

Most of the securities in this fund can be linked to the Olympics only indirectly, Mr. Solodukhin added. For example, you can buy shares of LUKOIL or Rosneft, since they have gas stations in Sochi (by the way, the gas station business may even suffer from the Olympics if, for security reasons, it is necessary to close a number of gas stations in the city), or shares of Yug-Telecom, which, perhaps it will earn more by increasing subscriber activity. The Magnit supermarket chain, which started its business in the Krasnodar Territory, now operates in many regions of Russia, and it also cannot be classified as a purely southern project. But you can hardly count on the fact that the possible growth of business in Sochi will have a noticeable impact on the quotes of such giants as LUKOIL. In addition, in the rules of such a fund it will be impossible to establish clear criteria for securities and their relationship to the pre-Olympic boom.

“I think the Bank of Moscow management company’s move is more marketing than market-oriented. The rise of patriotism and interest in Sochi, of course, will continue, but the fund will have to confirm its worth with the results of its management,” concluded Mr. Solodukhin.

Elena KHUTORNYKH