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: Unifin Financiera and Credit Bank of Moscow
In the segment of high-yield securities we will pay attention to the Eurobond of the Mexican company Unifin Financiera. The issuer is a leading independent Mexican leasing company specializing in three main areas: operating vehicle leasing, factoring and auto and other types of loans. The headquarters is in Mexico City, the company employs 400 people.
As of March 31, 1919, the issuer's revenue for the last 12 months amounted to $ 882 million, net profit was fixed at $ 99 million. S&P and Fitch hold a BB rating for the company and its liabilities (with "negative" and "stable" forecasts, respectively). Unifin Financiera shares are traded on the Mexican stock exchange with a market capitalization of $ 0.8 billion.
The senior unsecured Eurobond in the amount of $ 300 million was placed in February 2018. There are 3 calls on the issue, the profitability of the nearest one (February 12, 2022 at a price of 103.688%) is 11.3%.
Last week, Fitch raised the long-term issuer default ratings of the Credit Bank of Moscow from BB- to BB. Rating outlook is stable. Fitch notes that the increase in the Credit Bank of Moscow rating mainly reflects a significant reduction in the volume of high-risk assets over the past two years due to reorganization, sales and an increase in risk reserves.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: HerbalifeNutrition Ltd and Ministry of Finance of the Russian Federation
Among the papers with high yield, we will pay attention to the bond of the world famous company HerbalifeNutrition Ltd. due in 2026. The issuer is engaged in the production and sale of weight control products, food products, sports goods, energy and nutritional products, as well as personal care products. Products are sold in more than 90 countries. The headquarters is located in Los Angeles, the company employs 8.9 thousand people.
As of March 31, 2019, Herbalife's revenue and EBITDA for the last 12 months amounted to $ 4.9 billion and $ 0.8 billion, respectively, while net income was fixed at $ 0.4 billion. Moody’s keeps a “stable” outlook on the company's rating change, S&P - a “positive” one. Herbalife shares are traded on the NYSE with a current market capitalization of $ 6.4 billion.
Issue in the amount of $ 400 million was placed in August 2018. On paper, there are 3 call options, the yield of the nearest one (in August 2021 at a price of 103.625%) is 8.4%. We draw attention to the rather high (7.25%) level of coupon on paper.
Last week, the head of the debt department of the Ministry of Finance of the Russian Federation Konstantin Vyshkovsky did not rule out the placement of sovereign eurobonds in dollars or euros this year. At the same time, the volume of placement will be less than in March 2019, when the Russian Federation sold bonds in dollars and euros by 3.9 billion dollars in equivalent.
Recall that in March, the Ministry of Finance of the Russian Federation placed the European issue with maturity in 2025 for 750 million euros. We decided to see how this issue is now positioned against the background of Eurobonds of countries of similar credit rating. In our opinion, the Eurobond of the Ministry of Finance of the Russian Federation looks interesting.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: L Brands, Inc. and Novolipetsk Steel (NMLK).
Among foreign papers with a higher yield, we will pay attention to the Eurobond of American clothing retailer L Brands, Inc. maturing in 2028. Founded in 1963. L Brands, Inc. owns about 3,000 stores throughout the US, as well as in the UK, Canada and the PRC, offering a wide range of products, including women's clothing, underwear, cosmetics and accessories. The company's brand line-up includes the world-famous brand Victoria's Secret. L Brands, Inc. employs 25.5 thousand people.
As of May 4, 19, the issuer's revenue and EBITDA for the last 12 months amounted to $ 13.2 and $ 1.8 billion, respectively, net profit was fixed at $ 0.6 billion. Shares L Brands, Inc. traded on the NYSE with a current market capitalization of $ 6.7 billion.
NLMK last week expanded its line of dollar Eurobonds, placing a 7-year issue at 4.7% per annum. The volume of placement amounted to $ 500 million. The placement was successful: the demand for securities reached $ 1.7 billion, the initial benchmark yield was 5-5.125%.
The duration of the Russian Eurobond market is on average low, and the emergence of a new 7-year issue should be of interest to investors. This interest becomes even more pronounced if we take into account the increasingly apparent trend of lower interest rates.
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 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
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