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Rietumu Bank’s subsidiary company, RB Asset Management, has registered its own new investment fund – Fixed Income Fund. Its high yield makes the fund an attractive alternative to deposits.

Моre detailed information about the new fund is provided in the interview with Dmitry Krutik, Vice-President of Rietumu Bank and Chairman of the Board of RB Asset Management.

The world financial crisis has made many players fully reconsider their investment strategies. These investors, having personally felt all the consequences of the financial meltdown, have tamed their appetites and started accumulating free assets on the not very profitable deposit accounts. And, although the situation has stabilised, recollections about the dramatic consequences of 2007 are still fresh in the mind. Investors are in search of ‘the golden mean’, by which a moderate risk is justified by the yield that can be obtained. Just such a possibility for investment is now provided by RB Asset Management. More detail about the new fund is provided by the Vice-President of Rietumu Bank and the Chairman of the Board of RB Asset Management, Dmitry Krutik.

– Could you provide us with more details about the new instrument that is being offered by RB Asset Management?

The Fixed Income Fund is a new own fund being offered by Rietumu Bank. We invest in various corporate and government bonds to form the fund, and it is the shares in this fund that can be obtained by our clients, who will then become co-investors of the fund alongside Rietumu Bank. In fact, we offer our clients the chance of ‘being in the same boat’ with the bank. Having kept the risks low, the fund’s assumed yield, after deducting commission and other charges, will be between 5-7% per annum, which significantly exceeds deposit interest rates.

– Why do you claim that the risks involved in investing in this fund are not high?

There are a lot of principles involved in the fund formation; moreover, every company and even every trader has its own “know-how”. The determining factor is the selection and analysis of criteria for determining the quality of the specific asset. Eventually it is the proportion of assets of different qualities that determines the general level of the fund’s risk and yield.

We have always been against the mechanistic and bureaucratic approach of the assessment of assets. A credit rating of ААА is not a panacea and it does not at all mean that a paper security cannot lose its value overnight. We, at Rietumu, came to the conclusion long ago that we need our own flexible system of indicators. For instance, we find it important that the correlation level of the debt load to the annual profit (EBITDA) of a company does not exceed a coefficient of two. We closely follow those figures which indicate a company’s capability of generating profit, of accumulating free assets within a short time, etc. In fact, this set of indicators expresses a philosophy which forms the basis for the Rietumu fund’s formation; this is our know-how. However, there are no special secrets. When concluding a deal, our managers will certainly inform clients in detail about our approach.

– Which clients is this fund intended for?

At present, the deposit interest rates in Europe and the USA have dropped considerably and continue to decrease.
Therefore, we recommend this fund to anyone who would like to diversify their risks and income. A yield of 7% pa is very good, taking into account the minimum of worry and concern about the safety and management of one's assets.

– What are the taxation terms for incomes from the fund? Is the situation similar to deposits, when 10% of one’s profit has to be shared with the state?

No, the figure we indicate – 7% per annum - is the net profit for the investor. The only thing that can influence this is income tax which, in its turn, varies greatly between different jurisdictions. In Latvia income tax is set at 15%, in Ireland it is at 25% and, for instance, in Cyprus the income from an investment fund is not taxable at all.

– What are sizes of the fund’s shares?

With regard to this, our approach is very liberal, and we do not set any raised requirements for our co-investors. The minimum volume of investments is just USD 75 thousand.

– What are the basic distinguishing features of this fund?

The main advantage is that we do not act as an intermediary between the security asset and the client, but offer clients the chance to become our partners, co-investors in the fund. In fact, Rietumu Bank shares all possible risks and benefits of this enterprise with its clients.

RB Asset Management will provide the bilateral quotation of the fund on a weekly basis and, this way, will secure its liquidity. Moreover, the clients – the co-investors in the fund – will be able to obtain a short-term loan secured by their fund’s share, up to 70% of its size.

– What will be the initial volume of the fund, and how do you see its development?

We start with the relatively small amount of USD 15 million and we think that the ‘subscription’ for it will be completed within a few weeks. As far as medium-term plans go, we expect the fund’s volume to increase up to USD 100 million within a year.

Eleonora Gailisha
Mass Media and Public Relations
Phone: +371-67020506
Fax: +371-67020563
E-mail: egailisha@rietumu.lv

On changes in CHF, NOK, SEK, DKK payments

2 June 2011, 12:00 Products & Services

New Fixed Income Fund – an Alternative to Deposits

On changes in CHF, NOK, SEK, DKK payments