Emerging markets specialist Da Vinci Capital Management has entered the European ETF market with the launch of ETF platform ITI Funds and two Russia funds listed on the Irish Stock Exchange (ISE).
The firm said the ETF platform launch was an extension of its skills it already has in place in emerging markets, and the two ETFs are the first in a number of ETF funds it plans to launch investing in emerging markets.
Oleg Jelezko, managing partner of Da Vinci Capital, said: "In over a decade operating in emerging markets we have built a highly-skilled team that has deep understanding of the markets and how they operate.
"The launch of ITI Funds will provide investors with a well-structured and regulated platform from which they can access what we believe is a significant growth opportunity."
Physically-backed, the ITI Funds RTS Equity UCITS ETF will track the RTS index, which is made up of 45 equity securities of Russia's top companies by market cap and liquidity, and has a total expense ratio (TER) of 0.65%.
In terms of sector weightings, it has 49% in energy, 19.4% in financials, 16.6% in materials and 4.6% in consumer staples, while it has 89.7% weighted in the large-cap space and 10.3% in mid caps.
Elio Manca, managing director of ITI Funds, commented: "We believe Russia's growth story is in its ascendancy.
"Much of the international data on Russia is pointing to growth strengthening throughout 2018.
"From a pure equity perspective, markets have failed to account for economic improvements, shares remain highly discounted with Russia having one of the lowest price-to earnings ratios in the world.
"The funds provide efficient entry, with diverse exposure to direct securities, into the Russian equity and bond markets at the low point of economic cycle in Russia."
The ITI Funds Russia-focused USD Eurobond UCITS ETF tracks Solactive's ITI Funds Russia-focused USD Eurobond index, which comprises of 22 eurobond securities.
The index can only track bonds which are equivalent or higher than Russia's sovereign rating and is currently made up of 4% BBB, 13% BBB- and 82% BB+.
Manca continued: "When it comes to the bond market, price levels are strongly supported by Russia's central bank through repo operations.
"Despite, or rather, because of western sanctions, Russian corporates have deleveraged themselves over the past three years and the Russian eurobond market remained resilient to credit rating downgrades due to strong domestic demand.
"Add to this, a re-rating of its credit score in the coming weeks is not unreasonable to expect. Such a move would see Russian foreign debt feature across a range of global benchmarks and would mark Russia as one of the most appealing of investment-grade emerging markets."
The two ETFs are the first in a number of funds the firm plans to develop in the emerging market ETF space.
So far, there has been $10m of seed money invested into the two ETFs, which has come mainly from the firm's own clients.
Along with the ISE, they will also be available to trade on the London Stock Exchange and Moscow Exchange.
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