The Fund's investment activities are intended for high net worth individuals who are considered to be sophisticated investors that are looking for a fund that aims to protect the capital invested whilst at the same time generating above average returns.
Attention! This investment falls outside AFM supervision. No license and no prospectus required for this activity.
This will be achieved through investments in public and corporate stocks and bonds, financial instruments, including futures and options, and certain types of real estate, although this type of investment will not represent anything other than a small percentage of the total investment fund. The nature of this alternative investment fund is that it is able to react swiftly to ever changing possibilities and risks in the markets and as such it
is assumed that other asset classes will be traded in the future if this is seen as being beneficial to the investors by the Fund managers. In addition, new sister Funds may be established in the future that will have a more specific investment focus if this is required by investors.
FULL DETAILS OF THE INVESTMENT POLICY CAN BE VIEWED DIRECTLY
Whilst the Fund aims to generate above average returns for Investors, the main priority of the Fund is primarily the safety of the funds that have been entrusted to us by our clients. It is for this reason that one of the main targets for investment is in Europe's largest firms. In addition, the priority given to debt instruments and, where appropriate, real estate is also considered to be an important element of the investment portfolio. At the same time we do not forget that in addition to minimizing the risk for our investors, we need to maximise the value of the investments made by our clients, and repay the trust demonstrated in us to manage these conflicting forces on their behalf.
For the purpose of maximising returns made by the Fund our managers and analysts constantly monitor the market situation in all the markets in which the Fund operates and any possible new markets. With the constant flow of informed market intelligence, decisions are made and assets traded between all the markets in order to ensure the best investment profile to maximise return and minimise risk. This technique ensures the maximum possible growth of the value of the assets but also makes it possible to hedge the possible risks of changes in market prices.
Our team consists of professionals with extensive experience in the Russian and global stock and commodity markets. Most have worked in large investment houses and our analysts are included in the TOP10 according to Bloomberg. With this extensive experience the team at Capital Pi aim to surpass your expectations and achieve good but safe returns on your investments through us.
The strategy is based on operation in debt markets of the G20 countries. Funds are invested in highly liquid, supranational, sovereign, municipal and corporate debt securities with an investment grade credit rating (at least BBB-) according to the key credit rating agencies (Moody’s, Standard &Poor’s, Fitch).
The investment instrument in this strategy is eurobonds from a limited range of issuers. In the selection of issuers to be included in the portfolio, the key factors are its balance across economic sectors and across the credit quality of issuers. The share of one investment instrument can be up to 25% of the overall portfolio. The key factor enhancing the expected return of this investment product is the opportunity to raise funds against securities in the portfolio at market rates. Thus, the expected return at portfolio maturity can be higher if borrowed funds are used.
This strategy is based on expectations of the Russian government bond curve. Normally, the yield curve is a monotone increasing upward-convex curve. It means that, first of all, the yield grows with time (positive slope) and, second, the rate of yield change decreases in time (tends to zero).
Today we will look at two corporate debt securities as investment ideas for this week: Southwestern Energy Company and Russian Agricultural Bank (RSHB).
In the segment of foreign papers with a higher yield, let us single out the issue of the American Southwestern Energy Company with maturity in 2026. The issuer is engaged in the exploration and production of natural gas and oil in several US states (mainly in Texas and Arkansas), as well as in Canada. As of March 31, 1919, the issuer's revenue and EBITDA for the last 12 months amounted to $ 3.8 and $ 1.2 billion, respectively, and net profit was fixed at $ 0.9 billion. Southwestern Energy shares are traded on the NYSE with a current market capitalization of $ 2.2 billion. All three agencies of the Big Three hold a “stable” outlook on the company's rating change.
Eurobond in the amount of 650 million dollars was placed in September 2017. On paper, there are four call options, the yield to the nearest of them (04/01/2021 at a price of 105.625%) is 9.8%. Pay attention to an interesting level of coupon on paper (7.5% per annum).
In the segment of high-yield domestic securities, we will focus on the only Eurobond of the Russian Agricultural Bank (RSHB). The subordinated issue maturing in October 2023 was placed in 2013 with a coupon of 8.5%. At present, the paper is trading at a level above par with a yield to maturity of about 7% per annum.
RSHB reported for 2018 under IFRS, for the first time in five years, showing net profit for the year (in the amount of 1.5 billion rubles). The level of capital adequacy of the state-owned bank is 9.5% (the terms of the Eurobond issue suggest the possibility of writing it off if this indicator falls below 2%). It should be noted that the only shareholder of the bank - the state - carries out the additional capitalization of the issuer.
The current spread in the yield of the issue of RSHB to the subordinated Eurobond of Sberbank with maturity in 2023 looks extended relative to the average value over the past 12 months.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Lloyds Bank Plc and Gazprombank.
Among high-rating securities with a higher yield, we will focus on one of the “eternal” issues of Lloyds Bank Plc with a coupon of 12.0% per annum. The Issuer provides banking and financial services in the UK. Total assets of the group reach 593 billion pounds, net profit in 2018 amounted to 4.7 billion pounds. Lloyds Bank Plc employs 71 thousand people.
The youngest subordinated Eurobond in the amount of $ 2 billion was placed in December 2009. The nearest call (at face value) is expected on December 16, 2024, then the call options will follow each quarter. In case of failure to call the paper in 2024, the coupon rate will be recalculated using the formula = 3-month LIBOR + 11.756%.
The minimum lot for the release of $ 100 thousand. Please note that LLOYDS 12 PERP is serviced by NSD and is available for qualified investors.
Gazprombank announced the revocation of its Eurobond on May 13, 2019 with a redemption in 2024, denominated in Swiss francs. This event made us pay attention to the segment of securities in this currency from Russian issuers. After the repayment of the GPB issue, the line of such papers will consist of 8 issues from 4 issuers.
Against the background of the negative yield of the benchmark (the yield of Swiss sovereign Eurobonds with maturity in May 2022 is now minus 0.8%) in terms of the ratio of profitability and risk, the most interesting, in our opinion, is Eurobond ABH Financial Ltd - Alfa Bank's parent company. Now with the paper (due in November 2022) can be fixed yield of about 3%.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Sprint Corporation and Development Bank of the Republic of Belarus.
Among foreign issues with high profitability will allocate US Sprint Corporation Eurobond maturing in 2028. Sprint Corporation is a diversified provider of telecommunications services in the United States: the company offers wired and wireless communication services for private consumers, businesses and government agencies. The headquarters is located in the state of Kansas, the corporation employs 30 thousand people. In 2018, the issuer's revenue and EBITDA amounted to $ 33.2 and $ 11.6 billion, respectively, net profit was fixed at $ 300 million. All three agencies of the "Big Three" mark the possibility of raising the company's ratings. Sprint Corporation's current market capitalization reaches $ 24 billion.
Eurobond in the amount of $ 2.5 billion was placed in November 1998. The minimum lot of paper is equal to the nominal ($ 1 thousand).
It should be noted that Sprint Corporation is an active borrower on the Eurobond market, and the issue maturing in 2028 is among the most liquid.
Among the recently placed securities we will pay attention to the debut dollar Eurobond of the Development Bank of the Republic of Belarus with maturity in 5 years. The issue in the amount of $ 500 million was placed last month with a coupon of 6.75% per annum. According to Interfax, the demand for placement exceeded $ 1.5 billion.
The issuer is fully controlled by the state: the government of Belarus directly owns 96.2% of the bank and another 3.8% is controlled by the state company Belaruskali. The issuer's rating corresponds to the sovereign (B), which reflects the role of the bank as a national development institution, a high probability of state support and subsidiary responsibility of Belarus for the bank’s debt.
The issue is trading at a premium of about 100 bp to the sovereign obligations of the Republic of Belarus and with a moderate duration with a yield of 6.5% looks, in our opinion, interesting.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: UPM-Kymmene Oyj and State Transport Leasing Company.
In the segment of high-quality securities (BBB rating), one of the Eurobonds of the Finnish company UPM-Kymmene Oyj maturing in 2027 looks interesting. UPM-Kymmene Oyj is a large European paper manufacturer. The company also produces pulp, lumber, plywood, label self-adhesive materials, etc. It has production facilities in 13 countries, the EU accounts for about 70% of sales. The company employs 19 thousand people. UPM-Kymmene Oyj shares are traded on the Helsinki Stock Exchange with a current market capitalization of 14 billion euros.
Issue in the amount of $ 375 million was placed in November 1997. Pay attention to the relatively high (7.45% per annum) coupon on paper. The minimum lot is par ($ 1 thousand).
Note the interesting positioning of UPMFH 7.45 11/26/27 in the Eurobond segment with a BBB rating.
Let us pay attention to the last Russian Eurobond placed this year - the issue of the “State Transport Leasing Company” in the amount of $ 500 million. Repayment on paper is scheduled for April 2025, so it has become one of the longest in the segment of domestic foreign currency loans.
The issuer of Eurobonds is one of the largest leasing companies in the country. It is in federal ownership; its obligations are characterized by quasi-sovereign risk. Moody’s and Fitch have dollar and ruble ratings for the issuer and its Eurobonds in Ba2 and BB, respectively.
Note that now on GTLKOA 25, you can fix the yield at 6%, which looks interesting against the background of current levels of profitability in the sector.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Southwestern Energy Company and Eurasian Development Bank.
In the segment of Eurobonds with a higher yield, let us highlight the issue of the American Southwestern Energy Company with maturity in 2026. The issuer is engaged in the exploration and production of natural gas and oil in several US states (mainly in Texas) and Canada. In 2018, revenue and EBITDA amounted to $ 3.8 and $ 1.3 billion, respectively, and net profit was fixed at $ 0.5 billion. All three agencies of the Big Three hold a “stable” outlook on the company's rating change. The issuer's shares are traded on the NYSE with a current market capitalization of $ 2.3 billion.
Eurobond in the amount of 650 million dollars was placed in September 2017. On paper, there are four call options, the yield to the nearest of them (04/01/2021 at a price of 105.625%) is 8.7%. Pay attention to an interesting level of coupon (7.5% per annum) on paper. SWN 7 ½ 04/01/26 is under maintenance at NSD.
Note that SWN 7 ½ 04/01/26 looks interesting against the background of Eurobonds from issuers from developed markets with a BB- rating.
At the end of last month, S&P raised the rating of the Eurasian Development Bank (EDB) from BBB- to BBB. The forecast is “stable”, which reflects the expectations of S&P that the EDB will be able to effectively manage business growth in the next 24 months, preventing the risk position from deteriorating. The agency admits raising issuer ratings, “if the bank maintains extremely high capitalization rates against the background of higher business growth rates, which will strengthen its role and importance as a development institution for the member countries”.
The EDB was established by Russia and Kazakhstan in 2006, and its participants are Armenia, Belarus, Kyrgyzstan and Tajikistan. The issuer is engaged in financing large investment projects in the Eurasian region. In 2018, the EDB investment portfolio increased by 47% to $ 3.4 billion.
In our opinion, the Eurobond of an issuer with redemption in 2022 looks interesting against the background of international securities with a rating of BBB.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Altice Europe and NLMK.
In the segment of foreign short-term bonds pay attention to an issue of a European telecommunications holding - Altice Europe N.V. This issuer is a cable telecommunications media company that offers television, broadband Internet access, broadcasting, digital advertising, telephone and entertainment services to customers around the world. The headquarters is in Amsterdam, the company employs 47 thousand people. Shares Altice Europe N.V. traded on the Amsterdam Stock Exchange; the company's capitalization is 4.5 billion euros.
The dollar issue maturing in February 2023 was placed in January 2015 at 6.625% per annum. The output amounted to 2.1 billion dollars. Prior to the redemption on paper, three calls are envisaged, the closest of them is scheduled for May 13, 2019 at a price of 103.313%. Please note that the minimum lot of paper is 200 thousand dollars.
ALTICE 6 ⅝ 02/15/23 looks quite interesting against the background of Eurobonds from issuers from developed markets with a rating of B.
Last week, Fitch upgraded NLMK's long-term credit rating from BBB- to BBB with a stable outlook. Fitch positively assesses the company's financial stability, ensured by a high level of operating efficiency and a low debt burden. Thus, NLMK joined a narrow group of Russian issuers (which also includes Lukoil, Novatek and Severstal), which have a rating higher than the Russian sovereign from the two Big Three agencies. It should be noted that the issue of NLMK with maturity in 2023 is traded with the maximum yield premium to the sovereign curve among the issues of such issuers.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: DCP Midstream Partners and Gazprom.
In the segment of securities with high yield and moderate duration, we will pay attention to the "eternal" dollar Eurobond of the company of the real sector of the economy - the American DCP Midstream Partners, LP. The Issuer provides processing, transportation, fractionation and storage services to producers and consumers of natural gas. It carries out its activities in three areas: services, logistics of liquefied natural gas and wholesale trade in propane. Included in the Fortune 500. Headquartered in Denver (Colorado). Market capitalization on the stock exchange - 4.8 billion dollars.
"Eternal" issue with a call option on 12/15/2022 at par is placed in November 2017. Its volume is 500 million dollars. In the case of non-calling, the coupon rate will be recalculated using the formula = 3-month interbank rate LIBOR + 5.148%. The minimum lot for the release corresponds to par and amounts to 1 thousand dollars.
We note that DCP 7 PERP looks interesting against the background of Eurobonds from issuers from developed markets with a composite rating of B+/B.
Gazprom in 2018 received a record 0.93 trillion rubles in net profit under RAS. This figure is an absolute record for the parent company, the previous record was in 2011 (882 billion rubles). A more objective picture will be able to provide consolidated reporting on the group (IFRS data), which will be disclosed by the issuer in late April.
On April 23, the issuer must repay the issue by $ 2.25 billion, after which its line of dollar issues will be reduced to 9 items. The most interesting investment in it at the moment is the issue with maturity in 2034, which continues to be traded with an expanded yield premium relative to the Russian sovereign curve.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Volkswagen AG and Ministry of Finance.
The policy of easing monetary policy, confirmed recently by the European Central Bank, made us pay attention to the securities denominated in euros. In particular, the segment of "eternal" Eurobonds, offering the highest levels of profitability. Note that the "eternal" paper in the euro emit not only banks, but also companies in the real sector of the economy.
For example, the Volkswagen AG concern has a whole line of "eternal" issues, among which we highlight the Eurobond, placed in June last year with a coupon of 4.625% (the issuer has another "eternal" issue with the same coupon, placed in 2014). Issue in the amount of 1.5 billion euros was placed on 20.06.2018. The nearest call option on paper is provided for 06/27/2028 at face value (further calls will follow each year). Please note that the minimum lot for production is 100 thousand euros.
In our opinion, VW 4 ⅝ PERP (new) looks interesting against the background of "eternal" Eurobonds with an "investment" rating.
The “window” of primary offerings that has opened since the beginning of 2019 has recently been taken advantage of by the domestic Ministry of Finance, which placed the dollar issue with maturity in 2035 with a coupon of 5.1% per annum. Although it is traded with a small premium in yield to the sovereign curve, we consider the most “old” issue (placed back in 1998) to be redeemed in June 2028 as a more interesting investment in the line of Russian government loans. For this much shorter issue (with a duration of just over 6 years), we can now fix the dollar yield at 4.6%. A distinctive feature of the RUS-28 issue is the minimum lot of $ 10 thousand (versus the usual volume for Russian Eurobonds at $ 200 thousand). Note also the very high coupon rate - 12.75% per annum.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Macy’s, Inc. and RUSAL.
The reduction in market expectations for growth rates causes a situation where in the sector of highly reliable Eurobonds yield of about 6% can provide paper only with a relatively long maturity. For example, the release of the largest US retailer clothing Macy’s, Inc. maturing in 2034. Eurobond in the amount of 550 million dollars (in circulation there are securities for 367 million dollars) was placed in November 2014. The issue provides one call option at par for six months before maturity. The minimum lot for M 4 ½ 12/15/34 is 2 thousand dollars. Note that the paper is serviced by NSD.
Founded in the mid-19th century by Macy’s, Inc. owns universal stores that sell clothing and accessories in the United States. The corporation also manages subsidiary companies engaged in address distribution of catalogs and electronic commerce. Macy’s Network, Inc. includes 840 department stores located in 45 states. As of February 2019, the company employed 130 thousand people.
In 2018, the issuer's revenue and EBITDA amounted to $ 24.8 and $ 2.8 billion, respectively, net profit was fixed at $ 1.5 billion. Moody’s keeps a “stable” outlook on the rating change (Baa3) of the company, S&P and Fitch agencies - “negative” (BBB- and BBB, respectively). Shares of Macy’s, Inc. traded on the NYSE, the company's current market capitalization is 7.2 billion dollars.
One of the events of the beginning of the year for the Eurobond sector was the return to trading mode of three issues of RUSAL after the removal of sanctions from the issuer by the U.S. Department of the Treasury. Since the beginning of February, papers have been actively reducing their premiums in terms of yield to the sovereign curve, including against the backdrop of reporting for 2018, which showed weak damage from the sanctions imposed.
However, due to the fact that the issuer is still without ratings, the premiums are still extended relative to their "pre-sanction" levels. So, for the issue with redemption on February 2, 2022, the current spread in yield to the issue of "Russia" with redemption on April 4, 2022 reaches 220 bp, whereas at the beginning of April last year - on the very eve of the appearance of sanctions news regarding the company - it was about 190 bp. March 10, the company said it expects the renewal of credit ratings within three to four weeks.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Vodafone Group PLC and Metalloinvest.
The policy of easing monetary policy, confirmed recently by the European Central Bank, made us pay attention to the securities denominated in euros. One of the highest returns in the segment of relatively high-rating securities is offered by the release of Vodafone Group PLC with maturity in 2078. The nearest call for paper (at par) is provided for in October 2028, then calls will follow each year. If the call option won't revoke in October 2028, the coupon rate will be recalculated.
An issue of 0.5 billion euros was placed in September 2018. Note that the minimum lot for paper is 100 thousand euros. The payout rank is junior subordinated, the release has a BB + composite rating from the Big Three agencies. The yield to the nearest call is 4.8% per annum.
On March 14, 2019, Moody’s upgraded the Metalloinvest rating from Ba2 to Ba1. The rating outlook has been changed from "positive" to "stable". The rating improvement reflects Moody's expectations that the issuer's “adjusted debt / EBITDA” metric will remain below 2.0, and the company will generate a steady positive free cash flow, as well as maintain strong liquidity indicators. Note that the S&P agency holds the BB + rating for the issuer, while the Fitch agency keeps one step lower (BB).
We note that the Eurobond Metalloinvest with redemption in February 2024 looks quite competitive against the background of securities from international issuers of similar credit quality.
Alexey Shternshis
Joint Managing Director
Capital Pi
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