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Da Vinci Capital Management launches emerging markets ETF platform with two Russia focused UCITS ETFs


Emerging markets investment specialist, Da Vinci Capital Management has expanded its business with the launch of ITI Funds, a European ETF platform, which will focus on developing a range of emerging market focused UCITS ETFs.

To begin with ITI Funds has today listed on London Stock Exchange two Russia-focused ETFs covering top quality equity and USD debt segments of the Russian financial market. They are: ITI Funds RTS Equity UCITS ETF – which follows Russia’s oldest equity index, RTS; and ITI Funds Russia-focused USD Eurobond UCITS ETF – which follows ITIEURBD Index.
Denominated in US dollars, the ETFs are traded on the London Stock Exchange, and primary listed on the Irish Stock Exchange. They will also be admitted to trading on MOEX, the Moscow Exchange in due course. Edmond de Rothschild is the fund administrator and custodian for ITI Funds while Luxembourg based Fuchs Asset Management is the management company.
The ITI Funds RTS Equity UCITS ETF physically replicates the free-float cap-weighted RTS Index (45 equities), which is Russia’s oldest and most widely used equity index for equity securities traded on the Moscow Exchange, calculated in US dollars. It is the only ETF to provide exposure to local Russian shares, outside of Moscow. The index is rebalanced quarterly and income will be distributed on an annual basis.
Elio Manca, managing director of ITI Funds, says: “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.”
ITI Funds Russia-focused USD Eurobond UCITS ETF is the only Russia-focused fixed income ETF on the market which provides 100 per cent exposure to USD bonds. It is based on ITIEURBD fixed income index designed by German index provider, Solactive AG. The index portfolio comprises USD Eurobonds of Russian issuers with a credit rating that is equivalent to Russia’s sovereign rating or above. Currently, the index comprises 22 bonds, providing investors with exposure to top-quality names on the market of Eurobonds of Russian issuers. It is calculated daily, assumes quarterly rebalancing and reinvestment of coupon income.
“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,” says Elio.

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