Russia: Teplukhin reunites Troika team for new boutique

The former head of Deutsche Bank’s Russia operations is creating a financial boutique offering asset management and advisory services.

Pavel Teplukhin, Matrix Capital

Pavel Teplukhin, who resigned from the German bank in June, launched Matrix Capital in September in partnership with former colleagues from Troika Dialog, the Russian investment bank that Sberbank bought in 2011.

The firm’s first venture is a Ucits-compliant Russia and emerging markets fixed income fund, which will initially target domestic high net-worth clients and then roll out to international institutional investors, Teplukhin tells Euromoney. 

“We discovered there were no Russia-specific corporate bond funds regulated by an internationally acceptable regulator,” he says. “We were very surprised because there is substantial interest among fixed-income investors in emerging markets due to very low interest rates elsewhere – and obviously Russia is a significant part of that universe.”

Teplukhin cites large order books for dollar bonds from the likes of Vimpelcom and Global Ports as proof of international appetite for Russian assets. “Basically every recent corporate issue was oversubscribed,” he says. “If foreign investors were allowed to, they would buy out the entire issue.”

Ultimately, the plan is to sell Matrix’s products – which will include an equities and special situations fund – to high-end European retail investors. For the moment, though, the target, Teplukhin says, is “Russia individuals who still have family offices located in countries such as the UK, Luxembourg and Cyprus”. 

This client base will also provide the market for Matrix’s advisory services, he adds. “These clients are very active in all sorts of M&A in Russia right now, but there is very little competition in the market,” he says. “Global banks only cover the top 10 Russia corporates, while the large Russian state-owned banks only look at transactions over $1 billion.”

Deals in Matrix’s target range – between $300 million and $1 billion – are currently covered only by “lawyers and auditors”, Teplukhin notes. “They are very good at execution but not at origination,” he says. “This is where we can add value. You need someone with imagination and vision to come up with the idea of potential M&A transactions that both sides will benefit from.”

He is particularly excited about opportunities for repeating Troika Dialog’s success in consolidating key industries in Russia two decades ago. “In the early 1990s, my partners participated in building the Russian beer industry through M&A,” he says. “Later, they were instrumental in putting together big agricultural corporates.”

Today, the list of sectors ripe for consolidation includes logistics, transportation, retail, entertainment – and, once again, agriculture, according to Teplukhin. “We see agriculture as the growth sector of the Russian economy,” he says. “We are talking about double-digit growth for the next 10 years or so.”

Teplukhin insists that Matrix Capital will not be a second Troika Dialog, the firm he co-founded in 1991 and helped to build into Russia’s largest homegrown investment bank. “I don’t think it would be wise to replicate the whole story of Troika,” he says. “It wouldn’t be bad to replicate the spirit of Troika though – the enthusiasm, the professionalism and the culture.”

He also sees opportunities to revive Troika Dialog’s early role as a local partner for larger investment banks. 

“We won’t get involved in balance sheet-intensive transactions ourselves but we could definitely work with firms with big balance sheets,” he says. “We can provide the brains while they provide the capital.”

Matrix Capital would be a “perfect fit” for global banks that have cut headcount in Moscow over the past two years as Russian investment banking volumes have plummeted, adds Teplukhin. “They want to satisfy their client needs and are happy to do the execution but they need a professional presence on the ground,” he says. “And here we are: on the ground, professional, experienced, with a 25-year track record.”

An obvious candidate would be Deutsche Bank, which shuttered its investment banking operations in Russia late last year in the wake of allegations of large-scale money laundering by Moscow staff. Teplukhin has not been linked to the mirror trades scandal and remains a member of the supervisory board of Deutsche Bank Russia. 

He says this would not prevent Matrix Capital working with the German bank. “I have checked with Deutsche and there would be no conflict of interest,” he says. “Matrix would be a good partner for them in Russia.” 

At the same time, Teplukhin believes the era of widespread pullbacks from Russia by global banks is over. “Over the past couple of years, three trends have combined to cause a dramatic change in the investment banking landscape in Russia: increasing global regulatory constraints, geopolitical issues and a domestic economic slowdown,” he says. “Some of those factors are now fading, so we won’t see the same cumulative effect in future.”

He expects both banking and investment banking to recover in Russia by next year at the latest. “We will then see the global houses come back to Russia, in one form or another,” he says. 

Teplukhin notes that, with the exception of Deutsche, all the big players have retained a presence in Moscow. “They keep a low profile, but they are all here,” he says. “They understand that Russia is a huge opportunity.”