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. Last Updated: 07/27/2016

Mobius' Templeton Taken Over by UFG

Two years after Credit Suisse became the first major Western bank to sell its asset management business in Russia, Templeton has become the second.

Templeton -- one of the world's largest mutual fund managers -- said Monday that it is closing down its Russian operation, six years after it was launched.

Local investment bank United Financial Group said in a statement that its subsidiary UFG Invest had signed an agreement with Templeton to take over management of Templeton's mutual fund in Russia.

"We think we are more flexible than Templeton and probably understand our clients better," UFG Invest chief Vitaly Sotnikov said by telephone. UFG already has its own fund, called Pyotr Stolypin, which has 50 million rubles under management, he said.

Sotnikov said the Templeton Fund in Russia, which manages equities currently valued at 61 million rubles ($2 million), will be renamed and that current clients are free to sell their stakes.

Templeton will keep its offshore Templeton Russia Fund, with $100 million under management. Templeton could not be reached for comment, but Mark Mobius, the head of Templeton Emerging Markets Fund, told the Financial Times now was not the right time for his company to be in the Russian mutual fund market.

"It's too early for us. I am not saying there is no potential and there is no question that pension funds will grow, but Russian houses are better prepared to handle them," Mobius was quoted as saying. "Our role, when Russians are ready, will be to invest globally for them," he added.

Harvey Sawikin, head of Firebird Management, a competing asset management company, said by telephone from New York that Templeton had probably run up against the hard realities of doing business in Russia.

"International brand names have turned out to be less important in Russia than having the right connections and relationships, as well as access to domestic capital markets," Sawikin said. Firebird currently has $200 million under management in Russia and the Commonwealth of Independent States and has specialized in Russian equities since 1994.

"Now most of the domestic money in Russia is coming from institutional investors and high net-worth individuals, as well as pension funds," Sawikin said. "And those people are not going to have Templeton manage their money just because it has a famous international name. They better use somebody they have relations with or who speaks their language literately and figuratively."

"Unfortunately, in Russia, many fund managers hoped retail asset management would pick up as a business, but this hope was high in 1997, and it remains high in 2002 -- not much has happened," said Slava Rabinovich, managing director with asset manager MDM Capital Advisors Ltd. The company currently manages $100 million in Russian equities and is in the process of launching a Russia-dedicated equity fund that will target high net-worth individuals and institutional investors.