Art of investments


VTB Capital Russia & CIS Fixed Income Fund Ltd recognized by Spear's Russia

Aug 26, 2016

VTB Capital Russia & CIS Fixed Income Fund Ltd took second place among the best Russian funds of 2015, according to Spear's Russia ranking.

A total of 24 funds were rated with an average track-record of 8.29 years, which is a significant indicator for Russian industry. The rankings were based on experts’ analysis of funds’ performance for 2015, the Sharpe ratio and the volatility of their portfolios.

Vladimir Potapov, Chief Executive Officer of VTB Capital Investment Management, discussed the results in an interview with Spear's Russia: 

What’s been happening on the market since the start of the year that could affect funds’ performance?

-        At the start of 2015 the Russian corporate debt market was heavily oversold. Because of this, we saw a lot of opportunities to extract attractive returns at moderate risk. During the year, the appetite for Russian risk returned. Investors realized that the majority of Russian issuers could service their debts without any particular problems. Moreover, a number of issuers took advantage of the chance to buy back their debt at a discount to face value. Due to the absence of any new public offerings, Russian bond prices quickly recovered, and in some cases we even saw a shortage in the market.

What was your strategy?

-        Our strategy was to profit from taking and managing risk in three areas: credit, currency and interest rate risk. We are constantly improving the investment process by analysing our results and looking at the sectors where we were successful.

Which major errors did you manage to avoid? And with which investments you were lucky?

-        We managed to avoid taking up a major position in distressed companies; but this was not just luck but the result of painstaking daily work. The position we took on financial sector securities made a significant positive contribution to our results in 2015.

Do you see inflows from new customers?

-        Yes, we see continuing interest in Russian debt nominated in foreign currency from both wealthy private clients and foreign institutional investors. As interest rates keep going into negative territory worldwide, the chase for yield continues.

How are you planning to finish this year? What are you betting on?

-        The Russian fixed income market has become quite expensive. So rouble bonds now look more interesting than foreign currency ones. In addition, you need to remember about the risk of the beginning of a turn-up in interest rates in the world. Currently, the fund duration corresponds approximately to the benchmark, and for investment we do not consider issuers with low credit quality. The portfolio also has a certain percentage of cash - some kind of option to use features that may appear on the market with an increase in volatility.


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