Strategy

Top Advisor Predicts Decline of Russian Family Office

Jason Corcoran, Moscow, 18 April 2007

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A leading Russian fund management executive has predicted the decline of family offices and asset managers who run money on behalf of Russian oligarchs.

Oleg Mazurov, chief executive of Rosno Allianz Asset Management, a subsidiary of the German insurer, said oligarchs and the Russian ultra rich would eventually turn to recognised Western private banks because of a lack of fund management talent in Moscow.

Speaking to WealthBriefing, Mr Mazurov said: "Every billionaire wants to have his own asset manager or a team of asset managers that can be named a family office. These will not consolidate and I think they will naturally die over a period of time because there is a real problem of a shortage of specialists in the market."

Mr Mazurov cited Viktor Vekselberg, co-owner of Rusal aluminium giant and the TNK-BP oil venture, and Andrey Melnichenko, the founder of MDM Bank, as oligarchs with their own family offices.

Yelena Baturina, the billionaire wife of Moscow Mayor Yury Luzhkov, recently transferred assets of her company Inteko into a newly formed equity fund called Kontinental, which will be worth 82.9 billion rubles ($3.15 billion).

Mr Mazurov believes UBS, Credit Suisse and Deutsche Bank are potentially huge players in Russia's onshore private banking market but it will take time for them to build up their infrastructure.

UBS launched limited onshore private banking services in Russia in January, hot on the heels of Credit Suisse who launched in September last year. Other competitors in the onshore market include market leaders Deutsche Bank, Citigroup and Austria's Raiffeisen.

German financial services giant Allianz and its institutional clients are to invest $1 billion this year with its Russian subsidiary Allianz Rosno Asset Management.

This follows Allianz's recent move to take control of the joint venture from its Russian partner Sistema, the telecoms group run by the oligarch Vladimir Evtushenkov.

Allianz Rosno Asset Management will now be more closely integrated into Allianz Global Investors, a top five global fund manager.

Mr Mazurov said the company would chase assets in the retail, institutional and private banking segments. He said: "Our plan is to get 5 per cent of the market and to break into the top ten. If you are out of the top ten, you have to realise you have to sell the business or be ready to be bought by someone."

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