Updated May 7, 2008

   Renaissance Investment Management (RIM) managing company intends to establish the first commodity market-oriented fund in Russia. Most clients would get interested in RIM offer in terms of the falling stock market and boom at raw material markets, as market participants consider. However, in their opinion, its legal opacity can scare investors off to invest into a fund.

   As said the head of RIM group for commodity products Mikhail Bilinkis, a new fund would invest in derivatives to raw material commodities: futures, commodity swaps, as well as to stock and over-the-counter options. According to Mr. Bilinkis, one portfolio part would be oriented to the wide range of commodity assets from oil to agricultural cultures, and another – to arbitrage transactions with the products of the Russian origin. "There are some resources, which world prices are determined by the Russian situation. For instance, the bigger part of palladium or nickel is extracted in our country, and these markets mainly depend on how exactly behave the Russian producers", says Mr. Bilinkis. It is planned to conclude arbitrage transactions at all largest world floors, at the New York Mercantile Exchange (NYMEX) and London Metal Exchange (LME) in particular.

   Despite the fact it is planned to register a fund on the Cayman Islands, in Renaissance expect that the Russian investors mainly will invest means in it. Minimal sum of investments to enter a fund is set at the $100 000 level. According to Mr. Bilinkis, at the moment of fund implementation its volume will total $50 million.

   Renaissance new offer would be of great interest among the Russian investors at the current market situation, as experts are sure. "There is the real raw material boom at the market now", marks Bank of Moscow analyst Dmitry Skvortsov. Since August, 2007 the prices for gold have upped by 34%, from $650 to $870 per troy ounce. Oil quotations demonstrate the record growth as well: the price for one barrel of WTI oil has crossed a new maximum exceeding a $122 mark. Thus, in August last year oil prices did not exceed $70. According to the forecast of Goldman Sachs analysts, in the nearest two years the oil prices continue growing up to $150-200 per barrel.

   "Renaissance new product reflects the current world tendencies, and there are no doubts it would be of high demand", considers Deutsche Bank chief economist Yaroslav Lisovolik.

   New commodity fund becomes a good alternative to the investments into stocks, as experts specify. "In terms of the stock market volatility and prices growth for commodities and raw material, investors can buy securities of raw material companies. However, these investments do not guarantee the same revenue, as investments in commodity derivatives", supposes Dmitry Skvortsov. In the opinion of Alfa Capital director general Mikhail Khabarov, it is hard to talk about the revenue of such fund, but "normally, the clients, choosing investments into commodity markets, intend getting an income at around 20-25% per annum".

   However, market participants note that success of new commodity fund is unobvious. "Risks are rather high at commodity markets, and growth tendencies are hard to forecast and they depend on political factors", says Trust bank chief economist Yevgeny Nadorshin. Moreover, in the opinion of market participants, investors interested in a fund can be scared off by legal investments registration. "Now clients prefer the schemes with their direct participation in a fund, therefore the off-shore Renaissance scheme can arouse investors’ mistrust", supposes the member of Agana managing company directors’ board Ivan Gelyuta.