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. Last Updated: 07/27/2016

UES Director Says Revamp Is Cash Cow

A fund manager on the board of power utility Unified Energy System said Friday that he would launch a specialized utility fund to play on a much-reviled power sector restructuring.

"The utility sector is Russia's last great undervalued resource," David Herne said in a statement. "Well considered investment in Russian utilities should return 300 percent to 1,000 percent over the next three to five years."

Herne, currently a fund manager at Brunswick Capital Management, said by telephone he expected to raise at least $40 million from institutions and high-net-worth individuals to invest in a selection of companies from several dozen regional utilities and UES.

The open-ended fund, closed for redemptions for three years, will be titled Halcyon Advisors and is to be launched early next year. Herne is leaving Brunswick Capital.

Many Western investors have sold down their holdings in UES on fears that the restructuring will wreck the value of their holdings.

Among other fears, investors say they are discounting for asset stripping in the carve-up.

"I have become convinced that the situation is far better than market valuations imply," Herne said in the statement.

"The market values the sector at less than 10 percent of prices in other countries, as though most of the assets will be lost and the remainder will be regulated to death. Both assumptions are incorrect. This is exactly the right time to invest," he said.