DST Capital and performance over politics

Business and politics are not always easy bedfellows and as I’ve mentioned before, Russia’s commercial climate has dampened slightly in recent months, a turn some commentators are putting down to political factors. But to draw such an equivalency between economic slowdown and the squabbles of our leaders with their noisy campaigns and motorcades is to ignore what I consider to be one of the primary strengths of the smart investor, namely to look beyond the posturing and PR to identify investment opportunities. Even in the midst of a media storm, an opportunity remains and business has to be able to determine where political currents run with financial ones, and where against. 

As a perfect illustration of this, earlier this summer saw the exciting news emerge that Yuri Milner’s DST Global is planning to launch a fourth fund, adding to its highly successful existing vehicles which have acquired significant stakes in everything from Swedish music streamers Spotify to Chinese e-commerce giant Alibaba. Following a well-established pattern, the new fund will straightforwardly be called ‘DST Global IV’. The simplicity of the name encapsulating the fact that Milner is going in the right direction, namely towards canny investment decisions and not the needless effort which so much of the political world expends on branding, image or – to use a buzzword which is now ubiquitous – ‘optics’. DST has consistently backed winners and the fact that a Russian GP like this can raise funds for a new vehicle despite the hostile environment demonstrates that where investment is concerned, performance really does take precedence over politics.

And this example of Russian investors moving to seize opportunities without being blinded by the political sandstorm has not been the only such case in recent weeks. As reported by Vedomosti, US investment company BlackRock was among several major players to attend the annual Renaissance Capital investment forum in Moscow at the end of last month, a move intended to help them scope out the best way to proceed in the current climate. Indeed, as Bloomberg points out, the care BlackRock has been taking not to be blinkered by the world of politics has paid off in recent weeks after the company made a 20% gain on Russian stocks of which the critics would have steered clear. Such naysayers incidentally appear to count Citigroup amongst their number, for if a report in Business Insider is to be believed, the company lost out by following the very trends which BlackRock bucked. Betting that political upheaval would automatically spell financial disaster for Russia proved costly, and CFO John Gerspach was obliged to announce that Citi had shed up to $100 million dollars over unwise hedging.

Not that the world of politics should be ignored altogether of course, for both DST’s and BlackRock’s successes have been founded in part on canny calculations about the relationship between the political and the financial worlds. Recongising when political trends move in step with investment opportunities, has been central to DST realising that China’s growing prominence would mean an upward trajectory for Alibaba, and to BlackRock appreciation that the likes of Sberbank and Magnit would rally against the current ‘crisis’. The key, as Citi’s recent losses clearly show, is simply not to be steered blindly by political factors.

Performance is what matters in investment, and in this regard perhaps the likes of DST could teach the politicians a thing or two. As Julie Meyer writes in a piece in the Financial Times on responsible business:

“Business is a force for good in the world. Government is increasingly seen as no more than an antiquated proxy for collective action…”

I believe that this statement provides a suitable reflection of my broader message here, applicable in the UK, as in Russia. Be it the latest developments in the Russian space industry where Mikhail Kokorich’s Dauria Aerospace is well on the way to creating Russia’s first private group of orbiting satellites, or the gravity-defying launch of DST Global IV; smartly run businesses are capable of advancing new endeavours which transcend political scrapping down on earth.