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Verno Capital believes Russian reforms not yet priced into stocks
Thursday, January 17, 2013

By Beverly Chandler, Opalesque London:

Moscow-based long/short hedge fund Verno Capital returned 16.7% for 2012, despite a difficult Russian market. The firm has $200m under management. Senior Partner Roland Nash remains bullish on the Russian market as he believes that important reforms happened in 2012 but haven’t yet been priced into stocks; Russian debt has re-rated but equities haven't reflected that yet; dividends are rising fast on the back of a government-imposed minimum of 25% payouts and Russian stocks now trade at a bigger discount to their emerging manager peers than at any time in the last 10 years.

Russian equities ended 2012 deeply discounted, Nash says, but he believes that Russian fundamentals arguably improved in 2012 as much as in any 12 month period since the burst of reforms that followed Vladimir Putin’s first election in 2000. "Political risk has retreated and a more balanced macroeconomic framework adopted. Partly as a result, the economy appears to have moved away from its tendency towards boom/bust and on to what may prove to be its first period of sustainable medium-term growth in the post­Soviet period. Perhaps most positively, there has unexpected progress across a number of reforms" Nash says.

He believes there are several reasons for optimism for Russian equities over 2013. "First, the initiatives begun in 2012 should start to make an impact in 2013. Financial sector lib......................

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