Actuality March 7, 2008

   Merrill Lynch established the first fund for investments into the Russian infrastructure. The Bank managed to outstrip the other companies, including Russian ones, which declared about the analogical plans earlier. The market participants consider that interest in the infrastructure investments is related to the state development plans. In their opinion, portfolio investments will stimulate the companies to hold public offering of stocks.

   Merrill Lynch Bank registered the first infrastructural fund in Luxemburg oriented to the investment into Russia – Merrill Lynch Russian Infrastructure Basket. The fund structure lists 19 companies’ stocks from the telecommunications, power energy, engineering, metallurgy and transport sectors, including Severstal, Aeroflot, and OGC-4. In Merrill Lynch consider that the fund volume will total more than $500 mln. And it is oriented to the bank foreign clients.

   Issuer’s capitalization should exceed $100 mln to list the securities in the fund structure. And issuer’s volume of its stocks’ daily turnover on a stock exchange should exceed $1 mln. The fund structure will be reconsidered every six month.

   Merrill Lynch is the first bank which formed the fund for investments into the infrastructural companies of Russia. Other investment companies announced about the analogical plans earlier. However, they did not manage to complete to form funds. So, in August, 2007 the Australian Macquarie Bank and Renaissance Capital reported about joint venture establishment. It will invest in the infrastructure of Russia and the CIS countries and the investments sum totals $100-150 mln per each project. Ports, airports and motorways were named the most attractive objects then. "The fund formation will be completed in the nearest time", declared in Renaissance Capital. Moreover, Troika Dialog intended to form the $1 bln volume fund to invest into housing and utilities infrastructure and heat and power projects. Among the foreign banks Standard Bank estimated the advantage of the Russian infrastructural investments. In 2008 the bank representatives promised to raise $500 mln to the fund, which will invest into power energy, transport and municipal infrastructure.

   In the market participants’ opinion, the main interest to the investments into the Russian infrastructure is related to the state analogical plans. "The issue of investments into the infrastructural industries’ companies becomes more popular. Especially on the background of the Russian government statements and programs", says HSBC Bank chief economist Alexander Morozov. So, in terms of approved concept of the network development, the total volume of the required facilities for the airport infrastructure recovery by 2020 totals RUR 300 bln. The federal budget provides the greater part. The volume of investment fund facilities only for two projects of toll motorways construction totals RUR 27,4 bln. The investment program volume of OJSC Russian Railways totals more than RUR 700 bln for 2007-2009. More than 80% are spent on infrastructure development.

   According to Trust Bank chief economist Yevgeny Nadorshin, the federal authorities’ participation creates the specific environment for investors’ cooperation. "If the state enters this sector, the certain investments’ guarantees appear automatically. And that is important both for investors and for the funds’ establishers", he explains. Besides, the interest to the Russian infrastructure is predetermined by Sochi 2014. Moreover, the investments into Russia are favorable from the macroeconomic stability viewpoint. "Independence from the USA economy and other external events make Russia more investment-attractive than other developing countries", Alexander Morozov marks.

   Experts consider that the Merrill Lynch fund’s additional plus is that it promotes the infrastructural companies’ access to a stock exchange. "It is more difficult for non-public companies to attract money for further development. The infrastructural project participation is one of the ways to hit the target, and therefore companies will think about the public market access more frequent", says Alexander Zakharov the deputy head of Metropol Financial Company fund market department.