"The Kazakh government is ready to step in,'' Kazakhstan's Prime Minister Karim Masimov said this morning in a telephone interview with Bloomberg "The Kazakh banking system with the support of the government and central bank will fulfill all obligations to international investors.....We have our own specific plan to survive without any external support....I don't think we need support from the International Monetary Fund or overseas.''

Ranked as the ninth largest country in the world by size, it is also the world's largest landlocked country, with a territory of some 2,727,300 km² (which is greater than the whole of Western Europe). It is bordered by Russia, Kyrgyzstan, Turkmenistan, Uzbekistan and China. On the other hand, and despite its enormous size, Kazakhstan has a comparatively small population. No one actually has an exact idea of the actual size of the Kazakhstan population (not to mention the thorny issue of just how many foreign migrants live and work there), but the US Census Bureau International Database list the current population of Kazakhstan as 16.763 million, while sources drawing their data from the United Nations (like the IMF which I have relied on for the chart below) give a 2008 estimate of 15.135 million. In any event the current population level, after falling in the early 1990s as ethnic Russians left, has now stabilised, and is virtually stationary. This virtually stagnant population constitutes, as we will see, a significant problem for a country with such a massive resource base, and such enormous economic and development potential as Kazakhstan would seem to have.

Record Oil Revenue Boom

Kazakhstan is the biggest energy producer in Central Asia and the country's $100 billion economy has in fact grown at an average of 10 percent a year rate since 2000 (see chart below), in particular as the price of oil has surged. This rapid GDP growth produced a rapid increase in per capita income as well as national creditworthiness, and these in turn sparked in their wake a substantial construction boom. Indeed it has precisely been the bursting of this boom in the autumn of 2007 - on the back of the seize-up in global wholesale money markets which followed August's financial turmoil in the USA - which lies at the heart of Kazakhstan's current growth slowdown. Kazakhstan's economy expanded at a 'mere' 5.3 percent rate in the first quarter of 2008, half the pace achieved in the same period a year earlier, following a dramatic curtailment in bank lending, and if Kazakhstan is still able, despite all the problems we will see below, to maintain some sort of growth momentum at this point it is undoubtedly the result of the oil and other commodity resources which the country has at its disposal, and indeed as part of its initial response to the present crisis the country increased crude production by an annual 6.3 percent in the first four months of the year, according to official government data.




Now one of the most curious details about the present slowdown in Kazakhstan, has been the fact that at the very same time as the economy started to lose velocity the central bank found itself busy struggling to curb an inflation rate which was steadily shooting onwards and upwards towards the outer stratosphere, as revenue from record oil prices pushed up domestic demand, and the resulting construction and consumption boom drove up wages far beyond normal "productivity-gain" rates of increase (remember, there are not THAT many people in the country, and much of the population is rural and unskilled in relation to the needs of a modern technological and services economy). In fact inflation hit year-on-year rates of increase approaching 20% in the autumn of last year (see chart below), although it had dropped by to an annual 18.2% by September.




So, as well as containing the property bust, the Kazakh authorities have also had to conduct an inflation fight (more details below). So far from lowering rates like the US Federal Reserve has been able to do, Karakhstan's central bank was forced to raise the key interest rate to 11 percent in December 2007, at a time when annual inflation was riding at almost 19 percent, the highest for the country in over eight years. The refinancing rate was then maintained at the 11% level until it was finally lowered to 10.5% at the last central bank meeting in July.



Not Just Energy - Vast Resource Potential

The fact that Kazakhstan's industrial output growth has lost a lot of momentum in 2008 as the slowdown in the building industry provoked a slump in cement and other materials production should not take our minds too far away from the fact that the underlying potential in Kazakhstan is enormous. In fact while industrial output growth was reduced to an annual 3.8 percent growth rate in the January-June period, it was at least still growing.

The low point seems to have been hit back in January, when cement production which, not surprisingly, was among the hardest hit sectors, was down 26 percent year on year, the sharpest January fall in five years, as growth in the construction industry stalled, brought to a halt by the fact that the Kazakh banks, who had been struggling to borrow from abroad following the collapse of the U.S. subprime mortgage market, virtually stopped lending to homebuyers and builders.

Copper and rolled-iron output also declined an annual 13 percent in January while output from oil refineries and manufacturing industry decreased an annual 2.9 percent as the problems rolled in. Thus there is evidence of a very sharp shock initially hitting the local economy. On the other hand, since the country is resource rich and the given that first half of 2008 saw a very significant global commodities boom, there were other economic sectors to fall back on, and mining production was up 6 percent from a year earlier in the first quarter, bolstered by an increase in natural gas and coal output, which climbed 15 percent and 11 percent respectively. At the same time crude oil production went up by an annual 5.4 percent.

Apart from oil and gas Kazakhstan has a huge array of potential resource reserves just waiting to be tapped. Among these there is copper. London-listed Kazakhmys accounts for the bulk of Kazakh copper output - and this was down 17.5 percent year-on-year in January-April. Industrial output in Karaganda region, home to Kazakhmys and Arcelor Mittal mines and smelters, declined 5.5 percent year-on-year in January-April.

Kazakhmys reported that their first-quarter output fell 9.9 percent on "severe winter weather'' and repairs at its Balkhash smelter. Production of finished copper plates, or cathodes, from the company's ore fell to 75,500 metric tons, from 83,800 tons a year earlier. These drops in output are, of course not entirely associated with the credit crunch, but they do give an idea of the challenging and volatile environment in which the mining and extraction industries work in Kazakhstan. Realistically speaking it seems quite likely that output in these sectors will return to more normal levels during the second-half of 2008, having alreadt rebounding significantly from the low point reached in the first-quarter.

On the other hand industrial output in capital Astana and commercial hub Almaty, where most construction activities are based, was down 13.2 percent and 8.6 percent, respectively, in January-April, and this activity may well take much longer to recover.

Kazakhstan has also had to cut its 2008 oil production forecast to 67.6 million tonnes (1.35 million barrels per day) from a previous estimate of 70 million tonnes citing maintenance works and transport bottlenecks. The country is able to produce a lot of oil, but it does have a large problem getting that oil to the places where people want it. Three major pipeline routes - the Atyrau-Samara and Caspian Pipeline Consortium (CPC) links to Russia, and the Atasu-Alashankou pipeline to China - carry Kazakh crude off towards its end destinations, but none of these are proving sufficient to the demands on them.

"It is impossible to transport crude out of Kazakhstan without some difficulties," Senior Associate Klara Nurgaziyeva from law firm Dewey & LeBoeuf told an oil and gas conference last week in the Kazakh financial capital Almaty.

In a smoke-filled bar in the Kazakh financial capital Almaty, the laughter of Scottish ex-pats is loud and boisterous. More than three thousand miles (5,491 km) separate the Scottish Highlands and the Central Asian steppe, but a mutual interest in oil and gas has created a surprising alliance. Residents estimate that around 400 Scots live in ex-Soviet Kazakhstan, a resource-rich country roughly the size of western Europe.

Most come from Aberdeen, Britain's northeastern oil hub, and they bring with them their technical expertise."We're going to try attract Kazakhs to Aberdeen over the next few years and look at initiatives, and create further investment in Scotland from Kazakhstan," Lord Provost Peter Stephen of the Aberdeen City Council told an energy conference last week in Almaty. He said over 100 companies from in and around Aberdeen are active in Kazakhstan, and the Scottish oil town even has a Kazakh consulate to serve the hundreds of Kazakhs who go to Scotland to train up for the oil business. The Kazakh-British technical university, set up by a group of Scottish universities seven years ago, occupies a grandiose columned building in the centre of leafy Almaty, which housed parliament before the capital was moved to Astana.

Prices for residential property soared 30.2 percent in 2007, reaching a record average mid-year high of 161,300 tenge ($1,338) per square meter, up from 123,900 tenge in 2006, according to the Astana-based state statistics agency. In the financial capital, Almaty, the average price was 345,200 tenge.

The drop in prices from these peaks and the sudden drying up of credit has caused numerous problems for would.be buyers, and Bank TuranAlem, Kazakhstan's second-biggest bank by assets, received $81.2 million last December from the state emergency investment program simply to finance the completion of unfinished construction projects.

The most recent government bailout of the construction sector was announced during the summer - just two weeks before the celebrations of Nazarbayev's 68th birthday and the 10th anniversary of the founding of the new capital Astana on July 6 - following the announcement by a group representing people who had purchased apartments in the unfinished buildings that they were planning a protest march to be held in Astana bang in the middle of the official festivities.

The Industry and Trade Ministry have said that there were 939 residential buildings, with 45,130 apartments pre-paid by homebuyers, under construction as of last January. Minister Edil Mamytbekov said in July that the cases of 4,558 homebuyers in 18 buildings "remain problematic'' because of conduct for which the builders in question had been "charged with crimes.'' The Kazakh Prosecutor General's Office said 123 construction companies that received 104 billion tenge ($865 million) in pre-payments from homebuyers were behind schedule or haven't even begun work on new apartment buildings.

Assets of "careless construction companies,'' including buildings and vehicles, have been seized to compensate lost investments of homebuyers and the government, according to the Prosecutor General's Office. Criminal investigations have been opened into eight companies. A total of 285 companies are building 407 residential projects in Kazakhstan and have received 231 billion tenge in pre-payments from more than 50,000 individuals and companies, prosecutors said. Of 200 ``problem'' projects delayed by at least six months, 110 are located in the capital Astana and 42 in Almaty.

The July rumpus was provoked by the fact that at the start of the summer the Kazakh government had spent only 51 billion tenge to complete stalled residential projects, a fraction of the bailouts promised by Prime Minister Karim Masimov in the autumn of 2007, according to data made public by the Ministry of Industry and Trade on June 23. The government had said on Nov. 14 2007 that it would spend $1 billion by the end of 2007 and another $3 billion in 2008 to "provide economic stability and growth'' by supporting the real estate market and small and medium-sized businesses. Following publication of this data, and some international press coverage, Masimov said that his original emergency investment program was in the process of being expanded, and his government announced plans to spend 17.2 billion tenge to complete residential projects in Astana.

President Nursultan Nazarbayev instructed the state to step in and finish projects, ``which have no source of financing,'' to ``help to reduce social tension,'' according to Edil Mamytbekov, a deputy minister of industry and trade, on June 20. President Nursultan Nazarbayev also said it was necessary to take ``tough measures against careless builders". As a result the Almaty mayors office announced on July 26 that another 46.4 billion tenge had been allocated to support residential projects in Almaty. The state had already invested 22.4 billion tenge and was going to spend the remaining 24 billion tenge by year's end, according to the announcement.

In April, however, the government had announced that the state development holding Kazyna would distribute 59 billion tenge to commercial banks during 2007 to finish 131 buildings in Almaty. Sergei Kuyanov, spokesman for Almaty Mayor Akhmetzhan Yesimov, declined to comment on the discrepancy between the numbers when question by journalists in July.

Whatever the complications of the present situation and the ins-and-outs of putting the construction and banking problems straight, we should not lose sight of the fact that Kazakhstan has, large financial resources which will surely help it weather the current situation. Official foreign currency assets totaled $46 billion in early June, comprising NBK reserves of $21 billion and oil fund (NFRK) assets of $25 billion. Commercial banks also have foreign assets of which about $3.5 billion are thought to be liquid. Total foreign assets broadly match foreign liabilities when the intracompany debt of the oil sector is excluded, while liquid foreign currency assets comfortably cover potential short-term foreign currency drains.


Favourable Demographics But Migrants Needed, And With Them Modern Citizenship Rights


The chart you will find below is known as a “heat chart”. It depicts the ongoing changes in Kazakhstan's age structure. Each dot represents the number of people in any given age group at any given point in time. A dark red dot represents the largest concentration of people, by age, in a particular year while deep blue dots show the lowest concentrations. A single dark red dot is the equivalent of almost 406,000 people while each deep blue dot represents nearly 23,000 people.


In the upper left-hand corner of the chart the bright reds and yellow areas depicts the population boom that started in the mid 1970s and lasted until the late 1990s. The remnants of that boom extend downward from left to right across the chart. The band also narrows as this population segment ages. This is simply a reflection of the reduction in the total numbers in the population bulge cohorts as out-migration has taken its toll.

Many ethnic Germans and Russians, for example, left Kazakhstan during the years following the end of the Cold War. In the lower left-hand side of the chart there is a preponderance of dark blue dots, indicating a relatively small number of people over the age of 60 years. Over time these dark blue dots are replaced by light blues and greens, a pattern reflecting a gradual but steady increase in the number of elderly people.

The strong budget position in Kazakhstan has provided scope for the government to use fiscal policy to support the economy as growth has slowed. We believe that the increase in spending in the recent supplementary budget is appropriate, and that the automatic fiscal stabilizers should be allowed to work, with any revenue shortfalls due to a weakening economy being accommodated in the near future rather than offset with expenditure cuts to meet budget targets. Going forward, the government's recently announced three-year budget plan maps out a transparent path for fiscal policy over the medium-term. We believe, however, that it is important that the government not commit to further large increases in public sector wages and pensions in future years given uncertainties about budget revenues—particularly from the oil sector—and the stage of the macroeconomic cycle in two or three years time.

Kazakhstan has large financial resources to help it weather the current situation, and medium-term economic prospects remain favorable. Official foreign currency assets, comprising central bank (NBK) reserves and oil fund (NFRK) assets, reached $48 billion at end-September, well above the mid-2007 level. The current account balance has strengthened significantly this year, and oil production is set to increase substantially in the years ahead.

As at the time of the Article IV consultation discussions in April, we believe that in the short-term policies should remain focused on managing risks to the outlook and setting the stage for the resumption of strong and sustained growth. Since our last visit, the authorities have continued to skillfully handle the difficulties the economy has faced, and we welcome the policy steps that are being taken in the monetary, fiscal, and supervisory areas to strengthen the resilience of the Kazakhstani economy. Nevertheless, considerable challenges remain, and these have been heightened by the renewed bout of global financial market volatility.

There is of course a long line of goons happy to take military, energy or economic handouts from the Kremlin, though the dramatic drop in oil prices and Russian stocks will limit its ability to buy people off. Mr. Lukashenko could well be holding out his support for cheaper natural gas. But Russia's erratic and aggressive behavior in the Caucasus has apparently given even him pause about its possible intentions against Belarus. In addition to Mr. Ortega, Russia did manage recognition by Hamas, Hezbollah and the Moldovan regions of Gaugazia and Trans-Dniester. But that is little solace for a Kremlin whose bigger goal in the war was to declare a Monroe-ski Doctrine for its "near abroad" and lead a new anti-American block. Fyodor Lukyanov, the editor of Russia in Global Affairs, summed up the strategy: "Our long effort to become part of the West is over. The aim now is to be an independent power in a multipolar world in which Russia is a major player." It's hard to be a major player when all you have is very minor friends.

The swift return to cordial relations was recognition of just how intertwined the German and Russian economies have become. Manufacturing everything from luxury autos to machinery to food, some 4,600 German companies are active in Russia and 70,000 German jobs depend on business with the country. Germany is also Russia's largest trading partner, with $45 billion in two-way trade during the first six months of this year. Little wonder that the 25 German businesspeople who joined Merkel in St. Petersburg seemed anxious to forgive the events in Georgia and get back to doing deals with Russian partners. The biggest deal: an agreement allowing energy supplier E.ON (EONGn.DE) to acquire 25% of a huge Siberian natural gas field owned by state-controlled Gazprom (GAZP.RTS). The Düsseldorf-based utility traded control of a 3% stake in Gazprom valued at $5.4 billion, ending years of stalemated negotiations.

Speaking at the first meeting of the Anti-Corruption Council, formed in May, Medvedev called graft "a grave disease that eats away at our economy and corrodes the whole society," adding that the four bills being sent to the Duma were aimed at rooting out corruption by protecting property rights, strengthening the country's law enforcement and court systems, and eliminating myriad barriers faced by businesses. Medvedev used the speech to answer critics who have said the war over South Ossetia buried all hope for a more liberal course for the government, saying that reforms would continue. "Voices can now be heard saying that after events like the August crisis in the Caucasus, for example, Russia will put this work aside and won't act," he said, referring to anti-corruption measures, in comments released by the Kremlin. "On the contrary, we'll be undertaking this just as energetically." Under the plan, the prime minister, deputy prime ministers, federal ministers and their family members would be required to make public declarations of their assets and income. The legislation would require state officials to inform their superiors of any known cases involving corruption and would also require officials who leave government jobs to get permission from their former bosses before accepting jobs with companies they dealt with while in office, Sergei Naryshkin, Medvedev's chief of staff, said after the meeting.

The Asian Development Bank, in which China plays a leading role, has extended a $40 million loan at the lowest possible rate to Georgia. The Shanghai Cooperation Organization - which includes China, Kyrgyzstan, Kazakhstan, Tajikistan, and Uzbekistan as well as Russia - refused to countenance Russia's recognition of two breakaway regions of Georgia. The rebuff of Putin is all the more striking because - at least from Putin's perspective - the central purpose of this group was to form an eastern counterweight to NATO. China and the Central Asian states may share the Kremlin's resentment of American dominance in the world, but they are not so eager to construct a multipolar world that they will act against their national interests.

“In a few minutes after the departure of president’s motorcade, another cavalcade of armored cars drove up to the plane – two UAZ cars and four Volgas. Armed to-the-teeth policemen poured out of the cars. Interior Minister Musa Medov was among them. Having seen Magomed Evloev, the policemen went for him to drag into the UAZ,” Khazbiev said. It was the action-thriller then.

It was only a day trip, but time enough to put his talents at the disposal of the South Ossetian fighters. Their protectors, column after column of Russian tanks, were rumbling southwards and Kaloyev simply slipped into a gap within the convoy. On the car radio he could hear the voice of the Russian Prime Minister,Vladimir Putin: no one fires on Russians and goes unpunished, he said. Those words were to be Kaloyev's motto that day, resounding with his powerful sense of vengeful justice. “You have to understand,” he told a reporter from the German newspaper Die Zeit after returning from the brief war. “Whoever hits me, is hit back.” The Caucasus is ruled by the principle of justified blood revenge: no-one trusts the police, the courts or the state. Justice is personal.

The construction of the BTC pipeline was a strategic victory for the Clinton administration, which was able to overcome initial oil company skepticism and Russian opposition. By actively helping to secure the supply of energy from the Caspian region via its preferred routes, the U.S. became a player in this previously forgotten part of the world. "All strategic contracts in Georgia, especially the contract for the Caspian pipeline, are a matter of survival for the Georgian state," Mikheil Saakashvili, who soon became Georgia's president, said in 2003, at the height of that country's Rose Revolution. But the American courtship of Georgia -- and its earlier courtship of Azerbaijan -- was a development that did not go unnoticed in Russia.

Nonetheless, Ankara sided with fellow NATO members in telling Georgia and Ukraine that they would be invited to join the alliance -- albeit without any time frame. But now that Russia has waged war in part over this decision, the Turks will have to pick sides. Deputy chief of the Russian general staff Anatoly Nogoivtsyn already warned Turkey that Russia will hold Turkey responsible if the U.S. ships do not leave the Black Sea. Foreign Minister Sergei Lavrov will travel to Ankara on Monday to make clear that Russia means it. Russia is Turkey's largest trading partner, mostly because of Turkey's dependence on Russian gas. More important, the two countries share what some call the post-imperial stress syndrome: that is, an inability to see former provinces as fellow independent states, and ultimately a wish to recreate old agreements on spheres of influence. When Mr. Putin gave a speech in Munich last year challenging the U.S.-led world order, Turks cheered. The Turkish military even posted it on its Web site. President Abdullah Gül recently suggested that "a new world order should emerge."

``We could be in for a volatile period until there is a resolution to what's going on in Georgia,'' said Vlad Milev, an analyst at Metzler Payden, which oversees $1 billion in East European stocks. ``We are not trading on economic fundamentals or company earnings. We are trading on headline news, and the headlines have been largely negative since the events in Georgia started.''

Russia's ambassador to Moldova, meanwhile, said the country's leaders should be wary of what happened in Georgia and avoid a "bloody and catastrophic trend of events" in the separatist, pro-Russia region of Trans-Dniester. The ambassador, Valeri Kuzmin, said Russia recognized the independence of South Ossetia and Abkhazia because of "Georgia's aggression against South Ossetia." Trans-Dniester broke away from the former Soviet republic of Moldova in 1990. A war broke out between Moldovan forces and separatists in 1992 leaving 1,500 dead. Trans-Dniester is supported by Russia but is not recognized internationally. Russia has 1,500 troops stationed there to guard weapons facilities.

The shadow struggle in Denver got under way with envoys from both Georgia and Russia seeking out influential players. “It is important for us to meet the key politicians in this country to make sure they have the right sense of what’s happening in our country and the right sense of what happened,” David Bakradze, the chairman of the Georgian Parliament and a former foreign minister, said by telephone from Denver. Among those Mr. Bakradze and his compatriots met with on Monday were Madeleine K. Albright, former secretary of state; Richard C. Holbrooke, former ambassador to the United Nations; and Susan E. Rice, senior foreign policy adviser to Mr. Obama. (A session with Howard Dean, the party chairman, was postponed.) In all their discussions, the Georgians argued for bipartisan firmness against Moscow. “It’s not about Georgia,” Mr. Bakradze said. “It’s a much higher risk at stake. It’s about Russia forcefully changing the borders of the post-Soviet space.”

Russia's invasion of Georgia represents the most serious challenge to this political order since Slobodan Milosevic unleashed the demons of ethnic nationalism in the Balkans. What is happening in Georgia today, therefore, is not simply a territorial dispute. It is a struggle about whether a new dividing line is drawn across Europe: between nations that are free to determine their own destinies, and nations that are consigned to the Kremlin's autocratic orbit.

As Richard Weitz at the Hudson Institute noted at the time, Russia could seize upon Kosovo as a precedent for fomenting separatist movements in the former Soviet republics, including South Ossetia’s drive for independence from Georgia in the Caucasus.

``We're shocked by the magnitude of the numbers, especially given that the company revised its investment plans only a month ago,'' Troika Dialog analysts Oleg Maximov, Valery Nesterov and Alex Fak wrote in a note to investors today. ``This raises questions about whether the management actually intends to generate any meaningful free cash flow.''

"In terms of the cost of the conflict, the impact on the economy is negligible," Parker told Reuters in a telephone interview. "We're not expecting to take a negative action with regards to Russia's rating. The main potential impact on Russia is through an impact

"We don't see any immediate impact -- it's more a potential impact if Russia decides to take more aggressive action in due course," Parker said. "But it is affecting investor sentiment."

Guide to Hedge Funds in Denmark

• Denmark and Norway hedge towards the future with announcement of new regulatory regime. Aiming at attracting more oversea investors, Denmark and Norway have both announced the introduction of a more lenient regulatory framework for the hedge funds, with includes a more transparent tax regimes and less regulation for managing the funds.
• This Article discusses the taxation issues regarding establishing a hedge fund in Denmark and to its potential investors.
• Warning lights in Denmark. Investment in private equity is becoming increasingly popular in Denmark, with some investors allocating as much as ten percent of total assets. In this article, I&PE's analyst Paula Garrido examines how Denmark's pension funds are structuring their portfolios to include these alternative investments.
• This news archive contains most recent regulatory updates and developments in Nordic hedge fund industry.
• Hedge Funds in Denmark and Internationally. This comprehensive article introduces the recent development and future prospect of hedge fund industry in Denmark. In addition, it also covers various hedge fund strategies and their risks in relation to prime brokerage and to investors.
• Review of Danish Capital Market. Composed by International Monetary Fund, this report gives a broad overview of Danish capital market, with detailed descriptions of the legal framework and regulation of both of its bond and equity market. The report also provides a future guidance on its rapid growing mutual fund sector and introduces the Danish Hedge Association.
• Scandinavians Arrange Emergency Funds to keep Hedge Fund Pirates from Destroying Iceland. Norway, Sweden and Denmark of 1.5 billion Euros to support the Icelandic Krona from an attack by hedge funds. These hedge funds are wielding what Warren Buffet calls 'Weapons of Mass Financial Destruction' (a.k.a. derivatives), who have targeted the country with short-selling 'bear raids' to try and drive the 300,000 people living in Iceland and their economy into bankruptcy for a quick buck.
• The Investment Fund Industry in Denmark. Taken from the Federation of Danish Association website, this article provides a overview of the Danish Investment Fund Industry, its organizational structure, pricing and cost structure and related legislations.
• One of Denmark’s largest banks, FIH is a corporate and investment bank specializing in financial services to Danish corporate, had selected SuperDerivatives (the benchmark for derivatives pricing and the leading provider of multi-asset front office systems, risk management, revaluation and online options trading solution) in order to strengthen and expand its capacity to trade interest rate derivatives.
• On the Hedge Fund Frontier. This year Scandium Fund Ltd. ranked among the xis best performing fund of hedge funds worldwide by MARHedge. In this article, the fund’s Co-founder and portfolio manager, Mr. Casper Hallas, shared with us the secret of Scandium’s success, his investing philosophy, and his opinion of the present state and future prospects of the Danish hedge fund industry.
• Danish Pension Provider Opts for Direct Hedge Fund Investment. PFA Pension, one of Denmark’s largest institutional pension providers with responsibility for $41.6 bn of pension assets, is set to distinguish itself from the majority of European pension scheme by investing directly in hedge fund. PFA plans to increases its allocation to equities and alternatives at the expense of bonds in the hope of higher returns.
• Denmark – Fund Market 2005 – 2006. This article introduces the economic and financial background of Denmark and its key trends in asset management service, and recent regulatory development (including tax) in fund governance.
• The regulation, taxation and distribution of hedge funds in Europe: Changes and Challenges. This report summarized the most recent legal development and regulatory changes occurred in the European region (up to 2006), and what are some effects that would have on the European hedge fund industry.
• Hedge Funds and the Financial System. The increasing prevalence of hedge funds has been a key trend in the international financial markets in recent years. This report created by the Denmark’s National Bank let us look inside the brief history of the Danish hedge fund industry, its present development and its future growth potential. The paper also examines the governance and regulatory structure for these hedge funds.
• Denmark's biggest pension funds will have to report on corporate social responsibility (CSR) as part of new legislation currently under development by the Ministry of Economic and Business Affairs.Under existing law, pension funds only need to state the kind of CSR guidelines they are following if they have an impact on their financial activities. Under the changes proposed, pension funds would no longer have a choice.
• Newly-formed Danish alternative investment firm Global Evolution is looking to make a name for itself in the emerging markets. The Kolding, Denmark-based manager is prepping its Emerging Markets Multi Strategy Fund for launch sometime in January with between US$50 million and US$100 million.
• Government-sponsored pensions savings scheme allowing foreign managers to gain visibility in the Nordic region. Fund manufacturers are exploiting new distribution models in Europe, where savings are migrating from banks and insurance companies to government-sanctioned fund selection platforms. The new Danish government-sponsored pensions savings scheme, the SP Valg-Folkebörsen, is allowing foreign fund managers to gain visibility in the region.
• Copenhagen, Denmark-based Danfonds is readying its first hedge fund, Frontier Market Fund, for launch later this year with more than €25 million (US$39 million). The firm will cap the fund at €200 million (US$315 million) and is in talks with potential seed investors. The Frontier fund, which will debut after September, will look for long positions in the frontier markets of sub-Saharan Africa, central Asia and the Caucasus, the Balkans, the Baltics and the Middle East.
• At the end of 2004, the Danish government presented a bill to create a legal and supervisory basis for establishing "hedge associations" in Denmark. According to the bill, hedge associations will be the Danish equivalent of hedge funds. Like hedge funds abroad, hedge associations will have full freedom to determine their risk profile and investment strategy.
• Denmark Country Report: In 2005, Denmark achieved the highest economic growth for a number of years and the GDP grew by 3.4 %. The growth is continuing in 2006 and especially domestic demand is making a substantial contribution. Private consumption is driven by higher disposable incomes, low interest rates, new loan products and accelerating house prices.
• Hedge Nordic reports that Danish fund of hedge funds Scandium Fund Ltd. was the sixth best performer in terms of sharpe ratio among all funds of hedge funds worldwide during the past year. This is according to figures published by hedge fund database MarHedge, which receives performance reports from 547 funds of hedge funds.
• The Danish venture capital industry is very much in its infancy but recent developments are ensuring that it becomes increasingly attractive to investors. Kim Forum Jacobsen of the Danish Growth Fund charts the country's rise and discusses its potential for future growth. With a highly educated population, state-of-the-art research in areas such as biotech, wireless technologies and photonics, Denmark has all the hallmarks of an attractive market for investors.
  

Articles related to Denmark Hedge Funds:

1. Hedge Fund Marketing
2. Hedge Fund Employment Guide
3. Russian Hedge Fund Guide
4. South Africa Hedge Fund Guide
5. Mexico Hedge Fund Guide
6. Canada Hedge Fund Guide
7. Texas Hedge Fund Guide
8. San Francisco Hedge Fund Guide
9. California Hedge Fund Guide
10. London Hedge Fund Guide

None of this will give president Dmitry Medvedev sleepless nights. With record foreign reserves, oil and gas prices high and economic growth strong, Russia is well placed to weather much greater storms than this. The authorities can finance public spending, war costs included, for years to come. Also, the financial market sell-off follows a long asset-price boom, which was, in any case, running out of steam. But life could be somewhat harder for Russian policymakers as they struggle to contain rampant inflation, the top economic challenge. Also, with foreign credit costs rising, big infrastructure schemes could become more costly. With the west powerless to stop Russia’s Georgian campaign militarily or politically, there is an obvious attraction in considering economic levers instead. But the US and the European Union should resist the temptation. Even when the political interests of the west and Russia clash, as they have done in the Caucasus, their economic interests remain closely aligned. This is particularly true in the European energy market, where the EU is Russia’s biggest customer and Russia is the EU’s largest supplier. This mutual dependence is – and must remain – a powerful basis for mutual economic co-operation. Any moves to limit Russian access to international organisations should focus on political clubs such as the Council of Europe, not the WTO, where countries with very dubious political records, such as Zimbabwe and Burma, are already members.

So, two ironies: 1) Financially speaking, the United States needs Russia a lot more than Russia needs the United States, and 2) it's likely the subprime mess will inflict greater economic damage on Russia than any coordinated Western sanctions could.

But Russia is under time pressure for at least three reasons. First, there is the emotional factor. The temptation to show that Russia has returned to a position of strength is very great. Which Russian leader does not want to enter history as another Peter the Great—not to mention some more recent leaders? Second, Russia’s strength rests almost entirely on its position as the world’s leading oil and gas supplier. But this will not last forever. Nor will it be possible to prevent technological progress forever—alternative sources of energy will be found. Above all, there is Russia’s demographic weakness. Its population is constantly shrinking (and becoming de-Russified). The duration of military service had to be halved because there are not enough recruits. Every fourth recruit is at present of Muslim background; in a few years it will be every third. The density of population in Asian Russia is 2.5 per square kilometer—and declining. There is no possible way to stop or reverse this process, and depopulation means inevitably the loss of wide territories—not to the Americans. In these circumstances there is a strong urge not to wait but to act now. What will be the impact of these trends on the Middle East?

Schroeder has been adamant in his insistence that Georgia was at fault and the chief protagonist in its recent conflict with Russia. In light of these comments, however, Schroeder, who developed close ties with Moscow during his seven years in office, has come under fire himself, with observers insisting he has a vested interest in EU-Russia relations.