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: 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
Today we will look at two corporate debt securities as investment ideas for this week: Minfin and British American Tobacco
In the relatively high-rated segment, we note one of the Eurobonds of Reynolds American Inc., the second largest tobacco producer in the United States. The issuer owns brands such as Camel, Pall Mall, Kent and Winston. The company employs 5.5 thousand people. In 2017, Reynolds American Inc. was fully acquired by British American Tobacco (BAT), with a current market capitalization of $ 79 billion. BAT is the second largest tobacco producer in the world, second only to Philip Morris International.
The senior unsecured issue with maturity on August 15, 2035 in the amount of $ 750 million was placed in June 2015. The issue market is global. One call option is provided on paper six months before maturity. There are no options for revising the coupon level (5.7% per annum). The face value and minimum lot on paper are respectively 1 thousand and 2 thousand dollars.
Note that BATSLN 5.7 08/15/35 looks very competitive against securities of comparable credit quality.
The boom in the primary market does not yet affect the segment of Russian sovereign Eurobonds. This is due to the fact that the domestic Ministry of Finance has already fulfilled the non-ruble borrowing program in 2019 with a margin. In addition, the US sanctions imposed on the Russian sovereign dollar debt also play a role. However, any restrictions lead to a shortage of securities, and interest in Russia's obligations, given its strong credit profile, is very high.
Recall that, unlike corporate Eurobonds, currency revaluation and NKD on the obligations of the Ministry of Finance of the Russian Federation are not subject to personal income tax. Of particular note is the issue with maturity in 2028, which, thanks to its double-digit coupon rate, offers the highest current yield (the ratio of coupon payments expected in the next 12 months to the current market price) in the entire segment.
Alexey Shternshis
Joint Managing Director
Сapital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Belarus and Sovkombank
Last week, S&P affirmed Belarus' long-term and short-term sovereign credit ratings for obligations in foreign and national currency at level B with a “stable" outlook. The agency noted an improvement in the macroeconomic policy of the republic, which allowed to stabilize its level of public debt and inflation rates. S&P experts believe that the Belarusian government will retain access to international capital markets and the possibility of obtaining support from Russia to refinance payments on public debt.
Belarus has three dollar issues of Eurobonds. With the highest premium in yield to the Russian curve, the issue is currently traded with maturity in 2027, which offers a yield of 5.5% with a duration of 6 years. Paper is serviced by NSD.
Against the backdrop of lower yields, relatively high-yield securities are of particular interest, among which the recently posted Sovcombank debut Eurobonds maturing in 2030. According to the results of the first half of 2019, the bank took the 12th place in terms of assets in the Interfax-100 ranking. All three Big Three agencies hold a “stable” outlook on the change in its ratings. Last month, S&P and Fitch increased their issuer ratings, noting that in the medium term Sovcombank could be included in the list of systemically important banks.
A $ 300 million subordinated Eurobonds was placed on September 30 this year with a coupon of 8.0% per annum. On paper, a call option is provided in April 2025 at face value. The minimum issue lot is 200 thousand dollars.
It should be noted that the issue of Sovcombank looks interesting not only in the segment of Russian bank securities of the second or third echelons (see the market map on page 17 of the review), but also against the background of international subordinates with a similar credit rating.
Alexey Shternshis
Joint Managing Director
Сapital Pi
Today we will look at two corporate debt securities as investment ideas for this week: Moscow Credit Bank and Tenneco
In the segment of highly profitable foreign securities, we note one of Tenneco's Eurobonds, one of the world's leading manufacturers of auto parts. The issuer produces products for regulating emissions and controlling the course. 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 cap of $ 0.9 billion.
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. The paper provides for 5 call options, the yield to the nearest of them (07.15.2021 at a price of 102.5%) is 20.8%. Options to review the coupon level are not provided. The minimum lot on paper is $ 2 thousand. Eurobonds are serviced by NSD.
The issue looks very competitive against the background of papers of comparable credit quality.
Last week, Moody’s affirmed the long-term ratings of Moscow Credit Bank (MCB) at Ba3, the rating outlook is “stable”. MCB priority unsecured debt ratings are also affirmed at this level. “The confirmation of the MCB ratings is due to the relative stability of the bank's financial profile during 2018 and in the first half of 2019, taking into account, on the one hand, a decrease in the volume of problem loans and, on the other hand, a weakening profitability, as well as maintaining generally stable sufficiency indicators capital, "- said in a press release Moody's.
The senior issues of the issuer offer a yield in the range of 5-6% and look interesting against the background of international peers.
Alexey Shternshis
Joint Managing Director
Сapital Pi
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