27.06.2007

INTERVIEW WITH: SERGEJS MEDVEDEVS – PAREX ASSET MANAGEMENT, FIRST VICEPRESIDENT

Tell me about Parex Asset Management Parex Asset Management was founded in2001, as a subsidiary of Parex Banka, the largest and fastest growing bank inthe Baltic region. We are the largest Asset managers in the region withextensive experience in global financial markets and with particular coreexpertise in the CIS and Eastern European investment sectors.

When was Parex Banka established? Parex Bank itself is the oldest establishedbank in the area, founded 15 years ago as the old Communist regime gave way tofree trade and capitalism. It is a privately owned bank which has shownconsistent profitability since it was established, winning numerous industryawards and accolades for its continued excellence and high performance.

How long have you been with Parex Asset Management? This is my 10th year andmy role is more strategic within the company although we all work very much asa team.

What is Parex’s management style and does it depend on the type ofinvestments being managed, eg bonds rather than equity funds? We are definitelyactive investors, focusing on the absolute return and this is pretty much thesame whether we are talking about bonds or equity funds. We have a bottom upapproach, which is especially important in the energy markets – we focus onthe overall prospect of the sector or company performance we’re looking toinvest in, but our main driver is ‘with risk, the opportunities are greater,so if you’re not active enough you won’t get the return…’

What was your background before joining Parex? I’ve always been interestedin money – prior to joining Parex I worked for an oil company in theirfinance department for several years. But I’ve always found business andfinance a great combination.

Which WIOF funds do you manage? We manage four of the WIOF funds: the BalticOpportunities Fund, the Russian Opportunities Fund, the CIS Bond Fund and theCentral Asia Opportunities Fund – these last two have just been launched soit is a very exciting time for us right now.

How have the funds been performing so far? And their outlook? Both existingfunds are for institutional clients and have performed extremely well – ourfigures show the Baltic Opportunities fund has an annualized return of 57%, with10% volatility, whilst the Russian Opportunities fund has a 53% return, with 23%volatility. Both funds have an asset value of 7million euros (BOF) and4.5million euros (ROF) respectively. And this positive trend looks set tocontinue.

How do you forecast ahead? What will the return be in 6 months for example?It’s always difficult to foretell exactly, although right now Kazakhstan isvery hot! It has the fastest growing economy in the region with huge untappedinvestment opportunities across the whole region – it’s an old frontiermarket with very fast growth and lots of company expansion. The first investorsinto the market place will benefit from excellent growth potential. All centralAsian countries are quite different, some quite unstable politically, thereforea much higher risk for investment. Kazakhstan is pretty stable however with afairly liberal economy, so indications look good for the next 6 months.

How do you decide which companies to add to your portfolio? Each fund hasslightly different markets that it focuses on, so really it is the day-to-dayfund manager working directly with his analysts who determine which companies toselect. We have up to 50 companies in each of our funds, and the universe isgrowing all the time. Our selection process is consistent and really works forus – it’s important that if someone decides to leave Parex, this systemdoesn’t fall down. But it’s crucial to remember you need a great team tohave a great system!

Why should I invest in your funds? I’ve already mentioned our trackrecord – and it says a lot that our employees (including me!) also feelconfident enough to invest with us. Indeed, Parex Bank is actually one of ourbiggest clients.

Analysts are bracing themselves for a stock correction in June – are youworried? You cannot avoid fluctuation in prices – volatility is always there.You can’t complain about the cold in winter either, you just have to deal withit! For example, you can switch to a bond market, where there is less volatilityto get you through. Change is good as long as you’re prepared… no-one has acrystal ball!

What’s your view on emerging markets – are they risky? As I mentioned,the entire region is potentially tricky largely because it is so new anduntapped – geopolitically this is a riskier marketplace, however, theopportunities are great, as long as managers are careful and thorough in theirapproach.

Having never invested before, where should I start? Talk to someone you cantrust and be clear how much of a risk you are prepared to take with yourinvestment.

What drives you? I find my job really interesting – I never have time tobe bored. I’m learning new things every day and professionally I amdeveloping and facing new challenges all the time. I’m not ready toretire yet!

Do you have a Bloomberg screen in your bedroom? No, but we have four in theoffice, plus a Reuters screen.

Do you ever switch off from money markets? When the pressure is on,it’s sometimes difficult to switch off, but I’m lucky that I have twoyoung children (a 7 and 8 year old), so there are plenty of family commitmentsand events that I have to focus on. This helps!

How do you relax? My family helps me to unwind, also I am lucky to live andwork in a beautiful city, Riga, near Prague. And as I can walk to the officefrom my home, this is a great way to de-stress me before the day begins.