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 one debt security as investment ideas for this week: GeoProMining
One of the leaders of price growth in the past year was the only issue of GeoProMining with maturity in 2024. This dynamics does not look surprising, given the characteristics of this paper: senior issue, real sector, moderate duration, relatively high coupon (7.75%) . Even now, after the growth in the price of paper since the beginning of 2020 by almost a figure, the yield on the Eurobonds (6.6%) looks interesting both against the background of Russian securities and in the international context.
GeoProMining is a mining company specializing in the extraction and processing of gold, silver, antimony and copper in Russia and Armenia. The company is controlled by Siman Povarenkin.
In the first half of 2019, the issuer showed good dynamics in financial indicators, in particular, an increase of 57% y / y at the level of consolidated EBITDA can be noted. The company will use the funds raised as a result of the Eurobonds placement to refinance bank loans and complete the construction of an enrichment plant with a capacity of 300 thousand tons of silver-polymetallic ore per year at the Verkhne-Menkeche deposit in Yakutia. It should be noted that despite the placement of this Eurobonder ($ 300 million), the issuer's credit metrics remain at quite comfortable levels: for example, the Net Debt / EBITDA metric is 1.7, the interest coverage ratio is 5.4. In addition, the placement of the Eurobonds made it possible to optimize the debt repayment schedule: now the main payments are expected in 2024.
The 300 million senior GeoProMining issue was placed in June 2019 at 7.75% per annum. The issue market is Eurodollar. S&P and Fitch agencies rate the issue at B +. Options for early withdrawal and / or change of coupon level are not provided. Please note that the minimum lot on paper is 200 thousand dollars. Eurobonds are serviced by NSD.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at one debt security as investment ideas for this week: Braskem and Gazprom
Among recently placed papers, let’s pay attention to the dollar issue of Braskem, the largest petrochemical company in Latin America. A 10-year issue of $ 900 million was placed on November 25 this year with a rather high coupon of 7.45% per annum. Since the placement, the price of paper has risen to 106.5%, however, its yield (6.5%) still looks very interesting in the context of international securities of similar credit quality.
Braskem is a leading manufacturer of thermoplastic resins in the Western Hemisphere. With 36 industrial enterprises located in Brazil, the USA, Mexico and Germany, the company produces more than 16 million tons of thermoplastic resins and other petrochemical products per year. Braskem is a leading global manufacturer of biopolymers with its 200,000 ton capacity plant that produces sugar cane based ethanol. The company's shares are traded on the Brazilian stock exchange with a current market capitalization of $ 5.7 billion. 8 thousand people are employed in Braskem branches around the world.
The company shows a slowdown in financial performance in 2019, which has led to a deterioration in its credit metrics. The probability of default of the issuer after 5 years, calculated according to the default risk model of the Bloomberg agency, is now 3.2%.
The Eurobond is fairly liquid and is serviced by NSD. The issue market is Eurodollar. S&P and Fitch agencies rate the issue at BB- and BB respectively.
The paper provides 4 call options, the yield to the nearest of them (11/15/2024 at a price of 103.725%) is 6.5%. Options to review the coupon level are not provided. Please note that the minimum lot on paper is 200 thousand dollars.
Paradoxically, certain reserves in terms of price growth of domestic Eurobonds are created as a result of sanctions. So, due to the restrictions imposed by the US authorities on the purchase of a new Russian non-ruble public debt, the RF Ministry of Finance will probably not enter the foreign market with new placements in 2020, while it will have to pay off securities worth $ 3.5 billion and 750 million euros. The lack of a new offer will support traded issues in the secondary market.
Due to litigation with Naftogaz Ukrainy, the prospects for entering the external primary market in the coming months for Gazprom also look somewhat vague. Although the profitability of its farthest (and most highly profitable) issues fell to the 4% mark, their current yield looks very interesting both in terms of absolute values (for example, an issue maturing in 2034 now offers a current yield of 5, 8%), and in the context of Russian analogues. In addition, we note that we do not expect a key dollar rate increase in 2020.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at one debt security as investment ideas for this week: Tenneco and RSHB
In the segment of foreign securities, we note the issue that we already wrote about two months ago - Tenneco senior Eurobonds maturing in 2026. Since then, the paper has risen in price by more than 10 figures. Nevertheless, its yield to maturity (6.8%) still looks interesting both in terms of absolute values and in the context of international securities of a similar rating.
The issuer is one of the world's leading manufacturers of auto parts. Specializes in exhaust control and control products. It supplies products both for the needs of major automotive concerns, and sells it independently under its own brands. At Tenneco Inc. 81 thousand people are employed. Headquartered in Lake Forest (Illinois, USA). The company's shares are traded on the NYSE with a current market capitalization of $ 1.1 billion.
Despite the rather stable dynamics of financial results, investors were disappointed with the results of the issuer's M&A activity in recent years, which led to a significant increase in its debt burden. This was reflected in the decline in the company's stock exchange capitalization and the deterioration of its credit ratings. So, the value of the metric "Net debt / EBITDA" is 3.2x, which seems to be increased. However, in recent months, the position of the company has improved slightly, which was reflected in the value of its debt obligations. So, the probability of the issuer's default over 5 years according to the methodology of the Bloomberg agency, which reached 14% in August this year, has now fallen to 8%.
The senior unsecured issue with maturity on July 15, 2026 in the amount of $ 500 million was placed in June 2016. The issue market is global. Five call options are provided for on paper, the yield to the nearest of them (July 15, 2021 at a price of 102.5%) is 13.3%. Options to review the coupon level are not provided. The minimum paper lot is $ 2 thousand. Eurobonds are serviced by NSD
Against the backdrop of the placement by the Agricultural Bank of Russia (RSHB) of “eternal” bonds in euros, let’s pay attention to its only Eurobonds maturing in 2023. This paper offers a yield of about 5% and looks interesting against other subordinated Eurobonds from domestic issuers.
The Russian Agricultural Bank is a state-owned bank established in 2000 to develop the national credit and financial system of the agricultural sector and rural territories of the Russian Federation. Today, he is a key participant in the state agribusiness development program, and also takes part in the implementation of national projects. In addition, RSHB is a universal commercial bank providing all types of banking services. According to the results of the third quarter of 2019, the bank took 5th place in terms of assets in the Interfax-100 ranking. The RSHB employs 30 thousand people.
The state (100% shareholder of RSHB) is constantly recapitalizing it both to increase the possibilities for lending to the agro-industrial complex and to fulfill the standards of the Central Bank. As of September 30, 2019, the bank’s capital under IFRS reached 173 billion rubles, having increased by 13.9% since the beginning of the year. The growth of this indicator is associated with a contribution in the II quarter. 2019 of the federal budget in the amount of 15 billion rubles, as well as with the capitalization of profits for 9 months of 2019 in the amount of 4.3 billion rubles. By the end of 2019, the bank expects to additionally attract another 14.6 billion rubles from the budget, including 10 billion rubles, to be transferred from the 2020 budget. The rating agencies Moody's, Fitch and ACRA keep a “stable” forecast for changes in the ratings of the RSHB.
A subordinated issue of RSHB with a maturity of October 16, 2023 in the amount of $ 500 million was placed in October 2013. The issue market is Eurodollar. There are no options for early recall or revision of the coupon level before the end of the paper circulation term. Although the issuer's senior debt has rather high ratings from the Big Three agencies (Ba1 from Moody’s, BBB from Fitch), the suborda (including this issue) remain unrated.
Note that the conditions of this issue stipulate the possibility of its cancellation if the capital adequacy ratio of the 1st level of the bank falls below 2% (as of 01.10.2019 it amounted to 11%).
Since the beginning of the year, the yield on the issue has decreased by 340 bp. n., which was caused mainly by the narrowing of the premium to the UST. Note that the spread in the yield of the issue to Sberbank's subordinated Eurobonds maturing in 2023 tends to expand slightly in recent times.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at one debt security as investment ideas for this week: MKB
Among the papers that have lagged a bit lately, we will pay attention to one of the most distant Russian Eurobonds - the sovereign dollar issue with maturity in 2042. The current spread in the yield of this paper for issue with maturity in 2029 is 75 bp. p. that is above the average for the last 12 months (54 bp).
Last week, the head of the government debt department of the RF Ministry of Finance, Konstantin Vyshkovsky, in an interview with Bloomberg, said that Russia is unlikely to enter the foreign borrowing market in 2020. This is due to restrictions imposed by the United States at the end of August. At the same time, next year, USD 3.5 billion and Euro 750 million Euros are due for redemption. Under these conditions, the demand for existing Eurobonds will receive an additional impetus.
Among the securities in euros, we will pay attention to the senior issue of the ICD with maturity in 2024, which became one of the leaders in price growth last week. Against the backdrop of negative benchmark returns (comparable in duration to Bunds trading with a yield of minus 0.6%), the yield offered by the issue (3.4%) looks interesting not only in terms of absolute values, but also stands out against its counterparts.
MKB is a medium-sized non-governmental bank, conducting business mainly in Moscow and the Moscow Region. According to the results of the third quarter of 2019, the bank took 6th place in terms of assets (2.2 trillion rubles) in the Interfax-100 ranking. It is a public company with a current capitalization of $ 2.7 billion at Mosbirz. The controlling shareholder is ROSSIUM Concern LLC (56.07%), the group’s majority beneficiary is Roman Avdeev.
At the end of November, the issuer disclosed its IFRS financial statements for 9 months of 2019. Although the bank reduced its net profit by 35% yoy in 9 months of 2019, in the third quarter this indicator amounted to 9.7 billion rubles, which is 32% more than the result for the third quarter of 2018. the currency revaluation of perpetual subordinated Eurobonds denominated in foreign currency continues to be provided, which is due to the appreciation of the ruble compared to the end of 2018, ”the ICB said.
The senior unsecured issue with a maturity of 02.20.2024 in the amount of EUR 500 million was placed in February this year. Emission Market - Eurozone. There are no options for early recall or revision of the coupon level before the end of the paper circulation term.
From the moment of placement, the price dynamics of the Eurobonds are generally in line with the market. The decrease in the yield of the issue occurs mainly due to the narrowing of the premium to the underlying asset (Bunds).
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two debt securities as investment ideas for this week Kinross Gold Corporation and Russian Railways
In the segment of issues with a yield of at least 5.5%, let us pay attention to one of the Eurobonds of the Canadian gold mining company Kinross Gold Corporation. The issuer is engaged in gold exploration and mining around the world: in the USA, Brazil, Chile, Mauritania, Ghana and in Russia. Proved and probable reserves include 34.4 million ounces of gold, 44.0 million ounces of silver and 1.4 billion pounds of copper. The headquarters is located in Toronto. The company’s branches employ 7 thousand people. The issuer's shares are traded on the Toronto Stock Exchange with a current market capitalization of $ 5.4 billion. S&P and Fitch agencies hold the issuer and its liabilities with an investment rating (BBB-), while Moody’s is one step lower. However, last month Moody’s raised its outlook on the issuer to “positive”.
The senior unsecured issue of Kinross Gold Corporation maturing in 2041 in the amount of $ 250 million was placed in May 2012. The issue market is global. Six months before maturity on paper, a call option at face value is provided. Options to review the coupon level are not provided. The minimum lot on paper is 2 thousand US dollars. Note that the paper is serviced by NSD.
Last week, Russian Railways announced that it would redeem all three-issue bonds offered under the offer, including a British pound-denominated Eurobonds maturing in 2031. The paper will be redeemed at a price of 134.5% of the face value, the repurchase amount is 22.6 million pounds. sterling. The liquidity of the Eurobond as a result of the repurchase should not be badly affected - securities worth 627 million pounds remain in circulation.
This issue in 2019 is one of the leaders in price growth among all Russian foreign currency bonds, having risen in price by almost 15 figures since the beginning of the year. Such an impressive dynamics is associated both with a drop in interest rates in pounds, and with a relatively high duration of the paper. However, even after such rapid growth, the Russian Railways Eurobond is trading at the highest yield among senior securities with an investment rating from international issuers.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two debt securities as investment ideas for this week: PT Chandra Asri Petrochemical Tbk. and Petropavlovsk 2016 Ltd.
In the segment of securities offering yields above 5% and characterized by moderate duration, let us pay attention to the issue of PT Chandra Asri Petrochemical Tbk, an Indonesian producer of petrochemical products. The issuer produces ethylene, propylene, polyethylene, serving both the processing industries in Indonesia and regional export markets. The company's shares are traded on the Indonesia Stock Exchange with a current market capitalization of $ 11.4 billion. The headquarters is located in Jakarta, the company employs more than 2 thousand people.
The senior unsecured issue with maturity on November 08, 2024 in the amount of $ 0.3 billion was placed in October 2017. 3 call options are provided for the issue, the yield of the closest of them (November 8, 2021 at a price of 102.475%) is 7.1 % The minimum lot for paper is $ 200 thousand. Paper is serviced by NSD.
In the Russian segment, let's pay attention to the senior release of Petropavlovsk 2016 Ltd. with maturity in 2022, which, like most domestic securities, is now rewriting price highs. Nevertheless, the yield on the issue (7.5%) still looks very interesting. Now this Eurobond not only offers the highest level of profitability among senior securities with Russian risk and a rating not lower than B-, but also looks quite competitive against the backdrop of bank “eternal” Eurobonds, which are traditionally traded with the highest yields. Note that in August this year, Fitch upgraded the issuer's credit rating to B- with a "positive" outlook.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two debt securities as investment ideas for this week: Matador Resources and GTLK
In the segment of high-yield securities, we turn our attention to the Eurobonds of the US shale oil and gas producer Matador Resources. The issuer is engaged in exploration, development and production of oil and gas resources in the states of Texas, Louisiana and New Mexico. Headquartered in Dallas, Texas. The company's shares are traded on the NYSE with a current market capitalization of $ 1.8 billion.
Credit agencies Moody’s and S&P maintain a “stable” forecast for the issuer, its composite rating is at B +. As of September 30, 2019, the values of the company's main credit metrics are at quite moderate levels: for example, the Net Debt / EBITDA metric is 2.6x, the coverage ratio is 3.7x. The bulk of the debt ($ 1.1 billion out of $ 1.6 billion) was represented by the Eurobond maturing in September 2026.
The senior unsecured issue of MTDR 5 ⅞ 09/15/26 was posted exactly a year ago. The emissions market is global. Four call options are provided for the issue, the yield of the closest of them (September 15, 2021 at a price of 104.406%) is 8.9%. The minimum lot on paper is 2 thousand dollars.
Among the papers with quasi-sovereign risk, Eurobonds of the State Transport Leasing Company (GTLK) look interesting. At the end of September, the issuer placed the issue maturing in 2026, expanding the range of dollar Eurobonds to 4 securities. The Moody's and Fitch agencies hold Ba2 and BB + ratings for GTLK senior unsecured debt, respectively.
In the GTLK line, we prefer an issue with maturity in April 2025, which trades with the highest premium on yield to the sovereign curve. The Eurobond offers a yield of 4.5% with a duration of 4.7 years.
Alexey Shternshis
Joint Managing Director
Capital Pi
Today we will look at two corporate debt securities as investment ideas for this week: U.S. Steel and VTB
In the segment of high-yield securities, let us pay attention to one of the Eurobonds of the American steel company U.S. Steel It should be noted that the issuer (the second largest steel company in the United States) is going through difficult times: amid falling steel prices, its revenue indicators are falling in 2019, and the fight against costs is becoming more acute. So, as of November 1, 2019, futures for the U.S. hot rolled steel index fell by 40% y / y - it is not surprising that U.S. Steel has lost a third of its exchange capitalization since the beginning of the year.
Credit agencies downgrade their issuer ratings - for example, in September 2019, Moody’s downgraded U.S. senior unsecured debt rating. Steel to B3. The agency expects that as a result of financing strategic investments aimed at increasing productivity, the company's Debt / EBITDA metric will increase from the current 2.4x to 5x. However, Moody’s does not expect further fundamental deterioration in the industry and therefore holds a “stable” outlook on the issuer.
U.S. Senior Unsecured Issue Steel in the amount of $ 750 million was placed in August 2017. The issue market is global. Three call options are provided for the issue, the yield of the closest of them (08/15/2020 at a price of 103.438%) is 22.8%. The face value and the minimum lot on paper are $ 1,000. Eurobonds are serviced by NSD. Note that the issue looks very interesting against the background of global securities of comparable credit quality.
Against the background of VTB rewriting historical lows on profitability, we decided to pay attention to another subordinated issue of this issuer - the Eurobonds denominated in Swiss francs maturing in October 2024. At the end of last month, the issuer did not exercise its right to withdraw the paper as part of a call -option, resulting in a revision of the coupon level on it from 5.0% to 4.0725% per annum. Note that until the paper is redeemed, options for revising the coupon level or early recall are no longer provided.
The issue became one of the leaders in price growth in October in the segment of Russian Eurobonds, having risen in price by two figures. However, its profitability still looks very interesting in the segment of international subordinates nominated in Swiss francs.
Alexey Shternshis
Joint Managing Director
Сapital Pi
Today we will look at two corporate debt securities as investment ideas for this week: General Electric Company and TCS Group
In the segment of relatively high-rated securities, we note the Eurobonds of one of the pillars of American industry General Electric Company. Founded in 1872, the company produces locomotives, power plants (including nuclear reactors), aircraft engines, medical equipment, household appliances, as well as a wide range of military products. The company employs 283 thousand people. The headquarters is located in Boston (Massachusetts, USA). The company's shares are traded on the NYSE with a current market cap of $ 78 billion.
The senior unsecured issue in the amount of $ 5 billion (securities remaining in circulation for $ 3 billion) was placed in March 2002. The issue market is global. Options for revising the coupon (6.75% per annum) are not provided. The face value and the minimum lot on paper are $ 1,000. Eurobonds are serviced by NSD.
GE 6 3/4 03/15/32 issue looks very competitive amid comparable credit quality papers.
The news about the start of trading today from the TCS Group global depositary receipts on the Moscow Exchange prompted us to pay attention to this issuer. Recently, Fitch upgraded Tinkoff Bank's rating (part of TCS Group) by one notch - to BB with a "stable" outlook. Fitch notes the strong performance dynamics of the bank, supported by continuous diversification and growing business volumes. Note that Moody’s holds the issuer Ba3 rating, which is one notch lower than Fitch.
After the repayment of a subordinated issue of $ 200 million last summer, Tinkoff Bank was left with only an “eternal” Eurobond with the closest call option in September 2022. In our opinion, it has lagged a bit behind the market lately and looks interesting in general against the background of both Russian and international analogues.
Alexey Shternshis
Joint Managing Director
Capital Pi
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