RPT-Fitch Assigns Russian Prosperity Fund Luxembourg 'Strong' Fund Quality Rating

Fri Jan 17, 2014 6:36am EST

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Jan 17 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Russian Prosperity Fund Luxembourg a 'Strong' Fund Quality rating. The fund is managed by Prosperity Capital Management (PCM).

KEY RATING DRIVERS

Fund Presentation

Launched in February 2013, Russian Prosperity Fund Luxembourg is a Luxemburg domiciled UCITS IV SICAV with USD378m of assets as of 14 January 2014, investing in Russian and former Soviet Union (FSU) listed equities.

Prosperity Capital Management Limited (PCM UK) is the investment manager of the fund. Edmond de Rothschild Investment Advisors serves as the fund management company.

Investment Process

The fund uses a long term, discretionary, bottom-up, activist, investment approach. In-depth, fundamental proprietary research allows portfolio advisors (PAs) to build a concentrated portfolio of around 30 positions.

Research focuses on qualitative company and management analysis with a particular focus on value and catalysts of change. In Fitch's view, the depth of research and resulting thorough knowledge of companies provides it with a competitive advantage.

Decision-making is consensual, but there is some reliance on the lead PA. Liquidity requirements and levels of conviction rather than specific-risk guidelines drive position sizing and overall portfolio construction.

Portfolio risk monitoring is primarily performed at the stock level, in line with the fund's bottom-up, long term investment approach.

Resources

The investment team of PCM consists of seven analysts based in Moscow with sectoral responsibilities. Three of the analysts are also PAs. The size of the team is a differentiating factor of the fund in the industry. Alexey Krivoshapko is the lead PA. He joined PCM in 2008 and has been with the fund for 12 years. The operational and IT environment is built around proprietary systems, providing well controlled and efficient workflows.

Track Record

The fund does not yet have a three year track record and therefore does not as yet have a Lipper Leader Score for Consistent Return. Nonetheless, Seligson & Co Russian Prosperity Fund, a clone fund domiciled in Finland and launched in 2000, has achieved the best Lipper score over three, five and 10 years, demonstrating a consistently superior risk-adjusted performance relative to peers.

Asset Manager

Founded in 1996 and privately owned, PCM specialises in the management of Russian and FSU equities. The company employs 29 people and had USD4.1bn assets under management (AUM) at end-December 2013.

RATING SENSITIVITIES

The rating may be sensitive to material changes in the investment or operational processes, or resources dedicated to the fund. A material adverse deviation from Fitch's guidelines for any key rating drivers could result in a downgrade of the rating. For example, this may be manifested in the departure of key investment professionals or in significant deterioration in the fund's performance relative to its benchmark and peers, resulting from stock-picking errors on large holdings.

Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company. Fitch's Fund Quality Ratings offer an independent, forward-looking assessment of a fund's key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks. The ratings focus on the fund manager's investment process, key fund performance drivers, risk management, and the quality of the fund's operational infrastructure.

For more information, please see www.fundmanagement.fitchratings.com

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Link to Fitch Ratings' Report: Russian Prosperity Fund Luxembourg

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