By Andrei Skvarsky.
UFG founder Charlie Ryan has sealed his reputation as the most successful foreign banker in Russia ever by clinching a deal which nets him a fourth payout from Deutsche Bank.
The American banker, who oversaw Deutsche Bank’s Russian operation from 2005 to 2010, is selling Deutsche the remaining 60% stake in UFG’s Capital Management unit that the German lender does not own.
A Harvard graduate, Ryan first came to Russia in the early 1990s as a banker for the European Bank for Reconstruction and Development (EBRD) when he landed in St Petersburg to help advise the local authorities on how best to privatise local municipal assets. One of his key initial contacts in the mayor’s office was one V. V. Putin, who was deputy mayor at the time to Anatoly Sobchak.
Spotting a gap in the market, Ryan and a partner Boris Fedorov decided to strike out by setting one of the country’s first ever investment banks.
“Charlie has had the intelligence to understand the Russian political and economic context before positioning, and to pick his partners well,” commented Eric Kraus, an independent fund manager in Moscow.
Fedorov, Russia’s first modern finance minister under Boris Yeltsin, brought political clout and connections in the Kremlin while Ryan brought a hard-nosed ability to close a deal and rare understanding among foreign financiers on how to do `biznes’ in Russia.
“His recently completed deal with Deutsche is the culmination of a long, and highly successful, build-up of UFG, without the extreme volatility and boom-bust cycle which has characterised other institutions working in this market,” added Eric Kraus.
UFG/Deutsche Bank has been a constant force in Russia over the past two decades when many domestic rivals have gone to the wall and even more foreign peers have come and gone.
In 2004 Ryan sold 40% of the investment bank UFG for $70m to Deutsche Bank. Deutsche bought the remaining 60% from the US banker and his colleagues in 2006 for the mouth-watering sum of $600m in 2006. The two-step deal gave Deutsche the platform it coveted and within a year it established an unassailable lead in domestic equity and debt capital market league tables.
Ryan stayed on board as country chief of Deutsche Bank in Moscow as the German lender tried to handle the delicate succession issue. Key bankers defected to foreign and domestic rivals as lock-ins expired.
In 2008 Ryan took the helm at UFG Asset Management, a separate entity, and the same year he and Fedorov raised about $65m by selling a 40% stake in the company to Deutsche. Fedorov’s untimely passing in late 2009 forced Ryan to stay on at the helm of UFG at a time when he was shifting his family and his focus homeward to Philadelphia.
Deutsche had a buyout option which was exercised this month to buy the remainder of the fund manager. UFG confirmed to EmergingMarkets.me that Ryan and Florian Fenner, who are the company’s managing partners, and the Fedorov family “hold significant stakes” in the firm, but declined to disclose how much they made from the deal.
“We confirm that other businesses of UFG Asset Management, namely UFG AM Family of Funds (five hedge funds and several international managed accounts), UFG Private Equity Funds and UFG Real Estate Funds, are not affected by the deal and will remain independent and in control of UFG Asset Management shareholders,” the Moscow-based UFG spokeswoman said.
Minus Deutsche UFG Capital Management, UFG Asset Management has about $1.25bn in assets.
UFG Wealth Management, which is operating as a stand-alone business, is also unaffected by the transaction with Deutsche Bank and will remain independent, the Moscow-based UFG spokeswoman said.
So Ryan, who has tempted the German bank with four nibbles of the UFG cherry, may yet tempt them with his remaining wares in wealth management, private equity and offshore funds.
That midas touch gleamed brightly when he decided to help fund creation of Yandex, a Russian search engine. Investors would have made a scandalous return if they banked a profit following its $1.3bn Nasdaq debut in May this year. The stock soared 55% in the first day of trading although it is not known when, or if, Ryan and the other angel investors sold out.
Ryan has parlayed that interest in tech into setting up Almaz Capital Partners, which invests in Russian technology and innovation.
Meanwhile over at Deutsche Bank, the German investment bank has fallen on hard times since Ryan wound down his involvement. VTB Capital plundered over 100 staff in three years, and insiders said the move was engineered by Yuri Soloviev after he was overlooked as Ryan’s replacement.
But Ryan’s legacy, as he is wont to remind people, is a diaspora of talented bankers who have gone on from Deutsche Bank and UFG to help build and sustain Russia’s capital markets.