UFG Asset Management

UFG Asset Management is a large independent investment company with assets of more than $2.3 billion at the beginning of 2020.

UFG earns by forming funds with different investment strategies:

• direct investment funds in Russian companies and companies in other CIS countries,
• venture funds,
• infrastructure investments,
• stock market of shares and bonds,
• agroinvestments,
• development projects,
• warehouse logistics and
• real estate in Russia.

Qualified international and Russian institutional and private investors contribute capital to these funds and receive income from investment.

• UFG Asset Management
• UFG Private Equity

UFG receives a management fee and a success fee if funds exceed an annual return of 5-8% in dollars. If funds do not earn returns for investors, UFG partners do not earn anything.

The company is included in the projects for 5-8-10 years and, together with the owners, seeks to increase the volume and cost of the business several times. Then you still need to find a strategic buyer for the company's business or place its shares on the stock exchange.

Profitability of investments

Investor returns depend on investment strategy and timing. Private equity funds and venture capital funds are designed for investment cycles for a period of ten years. Liquid funds are open for entry and exit at regular intervals.

As for profitability, investments in the shares of the largest Russian "blue chips" UFG Russia Select for seven years, from 2013 to 2019, brought investors + 11.2% of the net annual yield in dollars. For comparison, the yield of the RTS index, taking into account dividends for the same period, was + 6.9%.

Our other fund, UFG Special Situations, which invests in Russian stocks and bonds, as well as buys shares and debt of private companies, has shown + 7.3% annual growth since 2013.

The return of UFG Private Equity private equity funds on fast-growing and innovative private companies is 15.6% per annum. Investors can expect similar returns from technology and venture funds.

Real estate funds (which included land, i.e. agricultural projects) UFG Real Estate brought investors 8-12% of net annual returns.

Of course, there are unsuccessful investments, while all the returns that are given in the examples above always take into account the results of all projects in the aggregate.

History

2020: UFG managing partner Polina Gerasimenko spoke about the company's business

In February 2020, UFG managing partner Polina Gerasimenko in a letter to RBC spoke about the features of the company's business^[1]:

It is important to note that we have never attracted budget funds or funds from state-owned companies. We do not invest in government contractors, do not participate in state tenders and do not receive any subsidies from the state.

UFG is the first signatory among direct investment funds in Russia of the PRI Principles (UN Principles for Responsible Investment), based on the long-term interests of the economy, the environment and society as a whole. The key tasks in investing we devote to issues of environmental, social and corporate (ESG) contribution to the Russian economy. These principles guide all our investments. So, UFG's current investments over five years, from 2013 to 2017, created more than 13 thousand jobs and doubled the number of employees from 14.3 thousand to 28.2 thousand people throughout Russia. We paid more than 44 billion rubles. taxes and invested more than 53 billion rubles. capital expenditures. During the same period, due to revenue growth, private companies in which UFG funds invested increased annual taxes to budgets of all levels by 2.6 times, and also increased capital expenditures by more than 2.4 times a year.

The withdrawal of most foreign investors from the market allows others to choose the best projects for investment. In times of crisis, strong companies become even stronger, and weak companies lose market share and become consolidation targets, that is, the risk of investment uncertainty decreases, and it is clear which companies to invest in. Those companies that attract financing will become leaders in their sectors, including able to expand their export potential. For example, UFG invested in the fast-growing global licensed business of the Russian cartoon Masha and the Bear, and the company directed capital to business development not only in Russia, but also in Europe, Latin America, China and the Middle East. The cartoon brand contributes to the international promotion of Russian success stories.

The stock market of Russian stocks is also a promising investment area, where dividend yields continue to grow amid declining inflation expectations. The development of Russian capital markets is extremely important for public companies, as it allows them to attract more borrowed capital and direct the attracted capital to innovation, business and infrastructure development. It plays an important role in maintaining economic growth, and also contributes to the growth of long-term pension savings and insurance reserves in our country.

2011: Sale of OFG Invest to Deutsche Bank

Deutsche Bank sold the Russian management company OFG INVEST CJSC in two stages, first 40% in 2008. After the sale of the management company, OFG INVEST began to operate under the Deutsche UFG Capital Management brand (but remained under the management of UFG for another three years), and in 2011, after the sale of the remaining 60%, it completely came under the control of Deutsche Bank. Five years later, in 2013, the Aton group of companies bought it from Deutsche Bank and transferred it to its brand.

2008

Mikhail Mishustin oversees the project in Bryansk "UFG Agro Partners"

One of the projects led by Mikhail Mishustin was the agricultural project in Bryansk "UFG Agro Partners," in which the company began to invest in May 2008. There was an abandoned land overgrown with shrubs. And for several years, we organized a high-tech agricultural production of wheat, barley, soybeans for 38 thousand hectares. The company was one of the largest taxpayers in the region and one of the key enterprises creating jobs. More than $30 million was invested in the project, a grain dryer was built, equipment was purchased, advanced Western agricultural technologies were introduced, thanks to which it was possible to more than triple the yield per hectare compared to the yield of agricultural land in the region. Advanced soil-saving technologies for land plowing and crop rotation were used. Subsequently, in 2014, the business was sold to one of the largest Russian agricultural holdings in Russia with an increase in the cost of the project in ruble equivalent by almost twice. The project successfully realized its potential, laid down by partners at the stage of its formation in 2009.

Future Prime Minister of Russia Mikhail Mishustin becomes one of the partners of UFG

The controlling partners of UFG since its founding were [former Finance Minister and Deputy Prime Minister] Boris Fedorov, Charles Ryan and Florian Fenner. In 2008, there were four of them, Mikhail Vladimirovich Mishustin joined them. The company is legally structured in each investment area separately. Each new fund is formed with different investors and different objects of investment and exists independently of each other. Within each direction, in addition to controlling partners, minority shares are owned by key managers of this direction.

In February 2020, UFG Managing Partner Polina Gerasimenko, in a letter to the editors, answered RBC questions about what he was responsible for, how much he earned and why Mikhail Mishustin, who took over as Prime Minister of Russia in January 2020, left the company. ^[1].

- As far as I know, when Mikhail Vladimirovich left the civil service, he considered various proposals to continue his career, including from business structures. He came to us in May 2008, at the invitation [by that time already the former Minister of Finance] of the late Boris Grigorievich Fedorov, and then the chairman of the board of directors of the UFG group. I remember that Boris Grigorievich then considered a personal personnel victory that he managed to convince Mikhail Vladimirovich to become a partner of the company.

Fedorov said that he and Mishustin had been friends since 1989, since the time of the International Computer Club. Fedorov greatly appreciated Mishustin's ability to build relationships with people and, if you want, his brains and analytical skills. In his opinion, Mishustin, perhaps, one of the few public servants had an impeccable reputation among the international and Russian business community.

Assets managed by the UFG group then exceeded $2 billion. But it is important to understand that the assets of the funds are like deposits in banks, they are not owned by UFG, but by investors who have placed them for long periods in our funds to invest in targeted strategies.

The partner's share is the share of UFG's future revenue from management fees and success fees if funds exceed the annual return of 5-8% in dollars. The size of commissions is established by investors and leading world practice. For example, for private equity funds, the management fee is 2% of the total assets of the funds (covers the costs of maintaining the infrastructure of the fund and the team), and the success fee is 20% of the return, provided that the annual minimum guaranteed return of 8% is achieved. Let me explain for a very simplified illustration: if a fund of $100 million is formed for ten years, during which UFG first invests and then implements investments with a total income of $300 million, i.e. loses the value of the fund, which exceeds the guaranteed return, then UFG will earn $40 million as a success fee, and investors will receive $260 million (i.e., increase their investments by 2.6 times). A partner with a share of 25% will be entitled to a portion of this income after deducting all expenses for the maintenance of the infrastructure of the funds and the team. Typically, math is much more complicated, and UFG's revenue is divided in a certain proportion between controlling partners and the key investment team.

Yuri Kovalchuk buys a UFG package at News Media

In 2008, UFG sold its stake in the News Media holding to a certain "non-market fund of a technical nature," presumably the "National Media Group" of St. Petersburg businessman Yuri Kovalchuk.

2006: Purchase of a stake in News Media Media Holding for $40 million

In 2006, Aram Gabrelyanov combined publications under the Life brand in 50 cities of Russia into his holding, selling 50% -1 share for $40 million to the UFG investment group, one of whose co-owners is Boris Fedorov, former Minister of Finance of Russia. Later the holding received the name News Media.

Notes