Ex Goldman, Renaissance Analysts Ready Russian Distressed Debt Fund

According to a December 30th report from Bloomberg, three Wall Street insiders (including a former Goldman Sachs Group analyst and an ex-trader at Renaissance Capital) are setting up a $130 million hedge fund focused on distressed Russian debt.

The new fund will be called Promeritum Investment Management LLP, with founding partners Pavel Mamai, Anton Zavyalov, and Richard Mhende from Quiris Capital, backing the venture.

Mangrove Partners Narrowly Avoids “Extinction-Level Event”

Nathaniel August's Mangrove Partners is having a rough 2020. According to a copy of the hedge fund's August update, a copy of which ValueWalk has been able to review, for the year to August 5, Mangrove Funds have returned -38%. Over the trailing 12-month period, the funds returned -44%. The S&P 500 produced a positive Read More

Details on new Russian distressed debt fund

“Russia is the main focus, as all assets are very cheap right now,” Mamai said in a recent interview with Bloomberg. The fund plans to invest in instruments including distressed debt and will also look at equities. The former Soviet Union, Turkey and Africa will be the main areas of interest for Promeritum.

Of note, Russia’s economy is projected to enter its first recession in six years in 2015 following a dramatic fall in crude prices and sanctions imposed by the West cut investment and undercut the ruble. Russia funds have seen outflows totaling $2.6 billion (4.6% of AUM) this year, which was the worst result among the BRICS countries, according to EPRF Global data.

The Promeritum fund seeks annual returns of 10% to 15%, Mamai said. The initial funding was raised from a family office for a term of at least two years. Promeritum is seeking co-investors.

In the interview, Mamai also indicated that the situation around coking coal producer and steelmaker OAO Mechel is possibly of interest to the new fund. Mechel partially ceased payments on $7 billion of debt this year after coal prices fell.

Commenting on the new distressed debt fund, “Many investors are eager to put money into distressed assets in these difficult times,” said Vladimir Tatarchuk, founder of Proxima Capital Group, a financial-services company based in Moscow. He also noted Proxima is also planning a new distressed-debt fund.

Analysts debate timing for buying distressed Russian assets

Wall Street analysts have been debating when is the right time to begin snapping up distressed Russian assets as crude oil prices and the ruble slide, with no firm consensus as of yet. That said, some hedge funds and private investors have already begun their due diligence or are in negotiations for various Russian assets, and you are likely to see quite a few more deals in the coming months.