Hedge Funds Q&A: Anastasia Tarasova, Maerli Capital

Many investors have turned to emerging markets amidst tightening macroeconomic conditions in the West. AlphaWeek’s Greg Winterton spoke to Anastasia Tarasova, Founder of hedge fund manager Maerli Capital, to get her views on emerging markets and to learn more about her firm.

GW: Anastasia, let’s start with Maerli Capital. Tell us about the firm and explain the focus on emerging markets equities - there’s been a lot of media coverage of investors turning to emerging markets, despite the ongoing geopolitical situation.

AT: We are unusual in that we invest in both emerging markets equities and U.S. equities because we believe that it makes sense - in terms of having a diversified and alpha-generating portfolio - to feature both, and the combination has worked well for us. We are based in Dubai, but the fund is in Luxembourg; we also invest opportunistically in other asset classes and geographies and we currently manage around EUR 300m in assets.

There is a very strong case for investing in emerging markets generally because that is where much of the economic growth is taking place internationally. And international investors are particularly interested in emerging markets equities as opposed to fixed income given the current circumstances; they are concerned that there may still be interest rate rises to come in many emerging market economies because of persistently high inflation, which has become embedded through rising wages. Because of this, they are holding back on investing into fixed income in emerging markets and instead are allocating to equities.

There are also some very interesting opportunities in the Middle East. The region is currently enjoying very significant growth, but our main area of focus in emerging markets is the area of the former Soviet Union. Clearly, the region has been profoundly impacted by the current conflict and there are major risks involved in investing in it. But what I would say is that there are areas in which it is possible to invest and where there are attractive returns, if you really understand the situation, can manage the risk, and can be very careful in terms of following local and international law.

GW: Maerli Capital is a multi-asset hedge fund. What other asset classes look interesting in the second half of the year?

AT: Gold. I believe in it as a hedge against volatility and uncertainty - when the situation is challenging, investors always return to it. The second reason is the growing popularity of AI, because the key technologies being manufactured utilise a lot of gold.

I would also highlight uranium and uranium mining companies. Just recently, we have opened several positions related to uranium. The Niger situation has been key; there was a military coup and there could be war. France received up to 40% of the raw materials for its nuclear program from Niger, and now supplies are in question, and world uranium prices have already gone up. We see prospects for further growth.

And we also maintain our interest in real estate in the Middle East - in Saudi Arabia and the UAE. The region is actively developing, the population is growing. Plus, the Middle East is now such a safe haven for money from all over the world.

GW: As you mention, you’re based in the UAE. There have been a couple of high-profile office moves by hedge fund managers in recent years to the Abu Dhabi Global Market – Brevan Howard this year, and Florin Court Capital in 2021, to name just two. What’s the appeal, and do you think this trend will continue in the next few years?

AT: I think this trend will continue and expand, for several reasons. Firstly, this is, of course, the general approach of the state. Abu Dhabi is striving to get away from oil dependence and is developing new directions, including claiming to be the financial center of the region. This means they are ready to offer special concessions to fund managers.

The second reason is the flow of capital to the Middle East. Now this is, perhaps, a global trend, which was accelerated by both Brexit and the conflict in Ukraine - and funds follow the money. The application of English law also plays a significant role, as in the DIFC in Dubai, and in the ADGM in Abu Dhabi, it creates legal certainty.

GW: Back to markets. As a multi-asset fund, Maerli doesn’t only trade emerging markets equities. Which sectors in developed markets do you like at the moment?

AT: We do have a strong focus on the U.S. market, but it is uncertain, given everything that is happening with rates. But I pay special attention to the shares of payment systems, some banks, software manufacturers and oilfield service companies. Retail, regional banks, semiconductors and metal manufacturers are a concern.

The S&P 500 index has grown by 17.5% since the beginning of the year and is trading with a P/E multiplier of 25.8, which is 73% higher than the median value. And if you look at the historical data, then the correction of the stock market should follow, which I expect in the second half of 2023.

GW: AlphaWeek recently published an op-ed from yourself in which you offered your thoughts on artificial intelligence technology. How does your opinion that a long-term view of AI is an important component of an investment strategy manifest itself in your portfolios?

AT: I do think AI is an extremely promising technology. The potential is almost limitless, but there needs to be tangible results now. We plan to look specifically at those companies that will not just chase AI as something fashionable, but that get really effective results after the introduction of AI into their processes. In my opinion, the prospects are not in the AI itself, as such, but in the results of its implementation. It is all about execution and delivery.

Anastasia Tarasova is Founder at Maerli Capital