MeritKapital Fixed Income Fund
Transcript of MeritKapital Fixed Income Fund
T A B L E O F C O N T E N T S
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I. MeritKapital Overview
II. MeritKapital Fixed Income Fund
a. Roles
b. Fund Specifics
c. Strategy
d. Top Holdings
e. Emerging Markets
f. Benchmark
g. Fees
III. A Word About Risk
IV. Biographies
V. Contacts
This material is for general information purposes only. There can be no assurance that the objectives and/or trends will come to pass or be maintained. This
material may include estimates, projections and other “forward-looking” statements. Actual events may differ substantially from those presented. MeritKapital
assumes no duty to update any such statements. Projections are based on current asset prices and are subject to change. The processes described herein are
illustrative only and subject to adaptation in any particular context. This material reflects the current opinions of the author but not necessarily those of
MeritKapital and such opinions are subject to change without notice. MeritKapital, its officers, directors, employees or clients may have positions in securities or
investments mentioned in this publication, which positions may change at any time, without notice. Fixed income investments entail interest rate risk, the risk of
issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal.
Fund share prices and returns will fluctuate with market conditions, currencies, and the economic and political climates where investments are made. Emerging
markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal
standards. The securities markets of emerging markets countries can be extremely volatile. The Fund’s investments denominated in foreign currencies will
decline in value if the foreign currency declines in value relative to the U.S. dollar. You should consider the investment objectives, risks, charges and expenses
of a mutual fund carefully before investing. A Fund’s Prospectus contain this and other information about the Fund. To receive a Prospectus, please call +357
2585 7700 or write to [email protected]. Please read it carefully. Past performance is no guarantee of future results.
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F I R M O V E R V I E W
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MK | CHRONOLOGIC DEVELOPMENTS AND ACHIEVEMENTS
‘06
’10
‘13
’14
’15
’15
Investment Advice
& Portfolio
Management
(LICENSE)
Custody & Brokerage
(LICENSE
EXTENSION)
Dealing on Own
(LICENSE
EXTENSION)
Successfully dealt
tens of millions of
distressed debt of
Bank of Cyprus; on
own book and via
intermediation
Becomes member
Firm of the CSE
Acted as a Eurobond
underwriter for an indirect
subsidiary of the Kazakh
sovereign wealth fund
’16
▪ Progressive investment firm with expertise in emerging market (EM) eurobond space
▪ Offices in London, Cyprus, Latvia (MiFID compliant, regulated by the CySEC & FCA)
▪ MeritKapital deals on own book, renders asset management and custodial services and also executes
on behalf of the clients
▪ MeritKapital total assets under management stand at approximately $150 million
▪ Settlement and custody are performed through internationally renowned custodians including Raiffeisen
Bank International, Vienna
▪ LOCAL NETWORK: MeritKapital, the fund’s broker, is networked with local EM banks and asset managers
via a proprietary brokerage platform for its extensive network of liquidity providers among western capital
markets. Their insight into underlying issuer specific and macro economic specific dynamics provide an
edge towards the optimal selection of investment opportunities.
▪ CAPITALIZING ON PLATFORM: MeritKapital is well known within the Russian and CIS space for its
emerging markets expertise. This reputation is built on a combination of local and international relationships
generating optimal liquidity and pricing, as well as heightened awareness of daily market developments.
These intrinsic parameters propel the fund’s performance.
▪ FUND’S TEAM: The team of the fund and of MeritKapital is comprised of talented individuals sourced from
Russia, CIS and MENA, adding their own networks of contacts and industry specific expertise.
▪ EXISTING PERFORMANCE: The fund is relatively recent however the platform and expertise are brought
forward from MeritKapital’s asset management unit with over a decade of performance. MeritKapital
successfully achieved capital preservation returns through the subprime crisis and later prospered within the
emerging market space thanks to its edge in this niche and optimal monetary easing environment. The
latter has allowed the fixed income space in general to perform and in a high yield hunting environment has
made the emerging market space popular.
▪ SMALLER FUND: It is empirically proven that smaller sized funds out-perform bigger sized ones
(500mn$+) on the back of a more attentive investment strategy and adherence to clients’ best interests.
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N I C H E
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DIRECTORS: Hannes Boeck, Evangelia Georgiou
MANAGER: MeritKapital Limited, Cyprus
ADMINISTRATOR: Meritservus Secretaries Ltd
CUSTODIAN: Raiffeisen Bank International AG, Vienna
AUDITOR: Deloitte, Cyprus
LEGAL COUNSEL: Antis Triantafyllides & Sons LLC
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R O L E S
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Fund Type: Open-end fund
Asset Class: Fixed Income
Morningstar Category: Global Emerging Markets, New Issues, Distressed Debt
Inception: 06/01/2015
Fund Base Currency: USD
Share Class Currency: USD
Benchmark: JP Morgan Emerging Markets Bond Index
Domicile: Cyprus
ISIN: CYF000000200
Bloomberg Ticker: MERFXPT CY
Settlement platform: CLEARSTREAM
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F U N D S P E C I F I C S
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▪ SYNOPSIS: to achieve consistent year on year Net returns that beat the respective benchmark by
selecting solid issuers within the EM space. Due to the volatility inherent to the EM periphery the
Portfolio Manager aims to contain risk by utilizing the following means:
▪ Solid issuers: Careful selection of underlying names filtered by utilizing Relative Value and
Financial Statement analysis tools. Dialogues with the fund’s local network including local
banks’ research or sales analysts that cover the Eurobonds and the investor relations’ unit of
the issuer directly
▪ Duration: Overall fund duration is kept in check to cap volatility associated with interest rate
dynamics, especially amidst a recently tightening monetary policy environment of the main
central banks (FED, ECB, BOJ, BOE)
▪ Diversification: Proportionate weightings across the fund are kept in check across regional
focus within the EM subset and across underlying industries in question
▪ Primary issue space: Should yield metrics of newly issued Eurobonds seem attractive
relative to the existing issuers’ and comps’ curves, then relative investment is undertaken to
reap respective returns
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S T R A T E G Y
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F U N D C O M P O S I T I O N
41%
11%8%
16%
11%
5%
3% 3% 2%
Government
Basic Materials
Financial
Energy
Consumer, Non-cyclical
Utilities
Industrial
Consumer, Cyclical
Communications
Credit Rating BBModified Duration 6.6Yield to Worst 5.2Cash 9.9
16.4%
10.4%7.9% 7.2%
4.9% 4.9% 4.7% 4.3% 3.5% 3.2%
32.6%
▪ CURRENT VALUATIONS: The Trump administration, the ensuing political environment between Russia
and the West, the unstable political environment that is inherent to the emerging markets in general has
added volatility to the markets that enables investors to better time entry points.
▪ ATTRACTIVE YIELDS: Recent market dynamics and US, France and Germany election results have
favored equity over the bond markets. Fixed income valuations have decreased across both IG and HY/EM
space and particularly on the long end of the curve. However, yields within the EM space remain
significantly more attractive than those of developed markets.
▪ COMMODITY SECTOR UNDERVALUED: A large portion of emerging market countries are commodity
exporters. As global economy growth gaining pace, the commodity industry is one of the beneficiaries of the
recovery. Thus, a considerable potential for upside remains unlocked in the sector. That said we understand
the related volatility and adjust our fund positioning to mitigate excessive risks.
▪ OPTIMAL GROWTH vs. DEVELOPED MARKETS: Easing Monetary policies of the ECB, BOJ and BOE
over the past decade have attempted to boost economic growth and reach inflation targets while the
respective growth in the developed economies remains slow. Emerging markets, particularly China, the Far
East and Africa, drive global economic growth from fundamental economic dynamics vs. central bank tools.
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E M E R G I N G M A R K E T S
Performance Fee* 15% per annum
Hurdle 3% per annum
Management Fee 0.75% per annum
Admin Fee US$ 10,000 flat
Director Fee US$ 2,500 flat
*Performance Fee: On each Valuation Day in a Performance Period, a Performance Fee is accrued for the account of the Manager in
an amount equal to 15% of the increase in the Net Asset Value per Share determined as at such Valuation Day (before deduction of
any accrued Performance Fees for such period) in excess of an annual Hurdle Rate of 3% compounded annually.
The Manager is entitled to an annual payment of Performance Fees, calculated as of the end of Performance period or at other times
upon the redemption of Shares or dissolution of the Fund. Performance Fees paid to the Manager are calculated on the basis of
unaudited data, are not refundable to the Fund, but may be subject to audit adjustments.
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F E E S
CHIEF INVESTMENT ADVISOR
GOLIB ZOHIDOV spent the last three years of his career with ICBC Standard Bank, London
where he traded Emerging Markets’ credit ranging from Russian, Latin American corporate
and sovereign Eurobonds. At Standard Bank, he established a footprint in Russian
corporate and financial credit by actively market making bonds which the bank was not
active in previously. Moreover, he extended the bank’s client pool that was comprised of real
money, hedge funds and Swiss based Private Banks and thus benefitted other focus areas
of the bank, especially the Sub Sahara Africa desk. Previously, worthy positions to note
include his four-year post as a Credit Research Analyst of the Emerging Markets’ Corporate
Credit Research team of Barclays, London and his two-year assignment as a Credit Risk
Management analyst of Deutsche Bank, London. Mr. Golib Zohidov holds a BSс in
International Investment and Banking from the University of Reading, UK, is a holder of CISI
Level 3 Certificate in Investments and is UK FCA registered.
INVESTMENT ADVISOR
LADI OLUWO began his career as a commodities trader with institutions both in London,
most recently with Commodities Spectrum Ltd, and in Nigeria, at Knights Capital Ltd, where
he built a local buy side network. In 2014, he joined Renaissance Capital Limited in London to
set up the Sub-Sahara Africa (SSA) Trading operation of the Fixed Income Desk. He was
responsible for identifying fixed income trading opportunities from the regions and advising
institutional clients accordingly. Subsequently, he joined MeritKapital Ltd to develop a similar
effort. He holds a degree in Mathematics and Statistics with Finance from Queen Mary
University of London and the Investment Management Certificate (IMC).
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T E A M
TRADER
ALLA KHOLODKOVA has more than 7-years experience in the capital markets industry. She
spent 6 years of her career on the Sales & Trading desk of Credit Suisse, Moscow where she
covered Russian and CIS clients for fixed income, swaps and repo products. Throughout her
career at Credit Suisse, she dealt with both local and hard currency bonds and gained a
thorough understanding of the underlying issuers as well as of the local market dynamics.
She has since transitioned to MeritKapital, Cyprus where she heads the Russian and CIS
Sales & Trading desk. Alla's relationships with Russian and CIS buy side firms are an
imperative variable to locking in optimal pricing for underlying bonds. She has two Master
degrees in Economics and Linguistics respectively from Nizhegorodzky State University,
Russia where both diplomas were obtained simultaneously.
INVESTMENT ADVISOR
PERSELLA IOANNIDES has an MBA and an MS in Financial Engineering from Columbia
University and a BS in Mathematics and Statistics from Bristol University. She spent three years
as a risk manager for Morgan Stanley’s institutional equity derivatives desk in New York. In 2007,
Persella set up Meritkapital, an FCA and CySEC licensed investment firm with an initial focus on
asset management and investment advice. Since, she has progressively grown the firm’s product
offerings to include proprietary trading, brokerage, custody and the underwriting business and has
worked towards building the firm’s global presence. Persella has developed the firm’s niche in the
Eurobond fixed income space, particularly in emerging markets including Russia and the CIS. Her
strong relationships with large buy side funds are testament to the positioning of Meritkapital in its
field of expertise.
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T E A M
INVESTOR RELATIONS:
TATIANA KOZLOVA joined MeritKapital in 2014. Prior, she spent two years as a salesperson
for Anixter, a Fortune 500 company focused on telecom & security. Tatiana has been
instrumental in building the firm’s sales desk, particularly in Russia and the CIS. In 2015, she
led MeritKapital’s involvement as co-underwriter on a Kazakh Eurobond issue of a subsidiary
of “KazTransGas.”; the deal was well publicized as it was the first issue to be denominated in
Kazakh tenge and be settle-able in Euroclear. Tatiana has an undergraduate degree in
Financial Management from Belgorod University of Cooperation, Economics and Law in
Russia and holds the CySEC MOF exams, where she ranked in the top 10th percentile.
RISK MANAGER:
DEMETRIS CONSTANTINOU began his career at the Risk desk of Easyforex, Cyprus, a
significant player in the global FX CFD’s industry. There, he was responsible for hedging large
FX exposures, monitoring feeds from liquidity providers, identifying risks and arbitrage trading
patterns caused by the system defectiveness. Demetris joined Meritkapital Ltd in 2015 and
runs the firm’s Risk. He has a BSc in Mathematics with First Class Honors and an MSc in
Actuarial Science from the University of Surrey. Demetris is a holder of the CySEC MOF
exams.
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T E A M
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DIRECTOR:
EVANGELIA GEORGIOU is an Associate Director of DI Ross. During her 15 years in the
accounting profession she has amassed a great deal of exposure to all aspects of complex
accounting matters as well as an up-to-date knowledge of the IFRS and their application.
Evangelia specializes in dealing with large international conglomerates and primarily deals
with complex consolidation and merger engagements that require conversion of local GAAP
into IFRS, multi-currency reporting and translations, the purchase and sale of Treasury
Shares and changes to Group structures. She joined our group in 2006 having been in the
audit and accounting profession since 2001. She is a Fellow Chartered Certified Accountant.
DIRECTOR:
HANNES BOECK began his career at Cleary, Gottlieb, Steen & Hamilton, New York, where
he worked on the structuring of products and global activities of financial institutions and the
tax and accounting treatment of derivatives. In ‘96 he joined Credit Suisse, London where he
rose up the ranks to reach MD level and to lead the global Product Development unit which
structured and marketed tax, regulatory and accounting motivated transactions covering all
asset classes and clients. In 2004, he left Credit Suisse to co-set up and lead Kupperstein,
Vienna, an advisory business on balance sheet restructurings of financials institutions and
other sizeable entities. Hannes holds graduate degrees in Economics and Computer Science
and also in Law from the University of Vienna. He also holds an LLM in Taxation from NYU
School of Law, New York which he attended as a Fullbright scholar.
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D I S C L A I M E R
▪ Merit Fixed Income Fund Limited (the "Fund"), is reserved for
professional and well-informed investors as defined by the
Alternative Investment Funds Law n.131(I) of 2014 (the "Law")
who, on the basis of the Offering Memorandum (the "Offering
Memorandum") and the subscription agreement, should make
their own assessment of the conditions of their participation in
the Fund. It is the responsibility of participating investors, to
determine whether the fund described in the Offering
Memorandum is suitable to their expectations of performance
and risk.
▪ The Fund operates as an Alternative Investment Fund with
Limited Number of Persons according to the Law, regulated by
the Cyprus Securities and Exchange Commission, license
#LPAIF05/2014, in the legal form of a variable capital investment
company. Prospective investors are not to construe the contents
of the Offering Memorandum or any communication relating to
this offering as investment, legal or tax advice. Each investor
should, however, consult his own legal counsel, accountant and
other professional adviser as to legal, tax and related matters
concerning an investment in the Fund.
▪ The Offering Memorandum, the Memorandum & Articles of
Association as well as the latest monthly report are available
from the registered office of the Manager and from the Fund’s
administrator. An investment in the Fund involves financial risk
and prospective investors are advised to read the Offering
Memorandum carefully in its entirety.
▪ With respect to any quotation of expected returns throughout
this Presentation or the Offering Memorandum, it must be
noted that these are generated from part research and cannot
be guaranteed. The value of an investment in the Fund may
fluctuate. Forward looking statements by nature comprise
risks and uncertainty since they are related to events and
circumstances that may or may not occur or materialise in the
future. Due to various risks and uncertainties, actual events or
results, the actual performance of the Fund may differ
materially from those reflected or contemplated in such
forward looking statements.
▪ There can be no assurance that the Fund; investment
objectives will be achieved and investment results may be
achieved over time. Investment in the Fund is not intended on
a complete investment program for any investor. Prospective
investors should carefully consider if an investment in shares
in the Fund is suitable for them in light of their circumstances
and their resources.
▪ No application has been made to list the shares of the Fund on
any stock exchange.
▪ Important: shares in the fund are offered solely on the basis of
the information and representations contained in the Offering
Memorandum and the documents specified therein, which are
available for inspection at the Fund’s registered office and no
other information or representation relating thereto is
authorised.
C O N T A C T S
| CONFIDENTIAL |
ADDRESS
MAIL TO: Eftapaton Court, 256 Makarios Avenue
P.O.Box 53180, Limassol CY-3301 Cyprus
EMAIL: [email protected]
TEL: +357 2585 7700
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