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WHY THESE OFFSHORE FUNDS ARE BURNING BRIGHT (int'l edition)

When Dominic Bokor-Ingram goes hunting for hot Russian stocks, risks are part of the job. Once, the London-based fund manager was taking 20 potential investors to a car plant in the remote outpost of Samara, just west of the Urals and 1,600 kilometers southeast of Moscow. As the group boarded its chartered jet for the return to Moscow, the pilot announced that the left engine was dead. Bokor-Ingram recalls that flight attendants rushed out vodka to calm passengers' nerves and eventually ''a local guy with a toolbox'' showed up to fix the engine. Then the airliner lurched down the runway. ''I'm usually a relaxed flier,'' he grimaces. ''But I was scared.''

Flying scared goes with Bokor-Ingram's business--navigating Russia's equity frontier as manager of two offshore funds for Regent Kingpin Capital Management Ltd. But so does flying high. His Red Tiger and Blue Tiger funds, plus a third Regent fund, White Tiger, took the top slots in BUSINESS WEEK's survey of the 500 largest offshore equity funds, logging returns over the past 12 months of 83%, 105%, and 107%, respectively. And Bokor-Ingram believes that, despite worries over President Boris Yeltsin's impending heart surgery, economic reforms will continue--and that similar stock-market gains lie ahead in 1997. Boasts the 28-year-old Bokor-Ingram: ''We can repeat this outperformance next year.''

BIG BET. Regent, which manages some $300 million in Russian equity investments from offices in London and Hong Kong, launched White Tiger in September, 1994. By the following June it had added Red and Blue--and made a big bet. Yeltsin's poll ratings were in the single digits. But the British-born Bokor-Ingram was convinced Yeltsin would win Russia's historic presidential election. So he and his partner sank 100% of their investors' money in blue chips.

By the time Yeltsin won the first round of the vote, Russian shares had rallied 35%. The Tiger managers quickly sold 25% of the portfolios they had built for their well-heeled clients--those who can afford the funds' $100,000 minimum investment. When the rally expected after Yeltsin's victory didn't materialize, stocks fell some 25% and Bokor-Ingram jumped back in. The market has since nearly regained its preelection highs.

Bokor-Ingram is sticking to blue chips. Right now, he's focusing on telecom, power-generation, and energy issues. He's high on Gazprom, the huge natural-gas producer that recently began a global share offering. Some 80% of his $300 million in equity investment is in just six companies, including Lukoil, Rostelecom, and Mosenergo.

The allure of blue chips is easy to see. Bokor-Ingram points out that leading companies trade at piddling price-earnings ratios of 3 or 4. And he thinks that Russia's beleaguered economy is beginning to turn around. He sees annual inflation settling down to 10% to 12% this year, versus 60% to 70% last year, and forecasts 2% gross domestic product growth in 1997. And he predicts that following the models of Poland and the Czech Republic, Russia's economy will grow by 6% to 8% annually over the next seven years.

MAIN FEAR. A lot could go wrong. Bokor-Ingram's main fear: Yeltsin dies within two months; he is succeeded by his sacked security chief, nationalist Alexander Lebed; and inflation surges. But if Yeltsin lives longer, Bokor-Ingram thinks Kremlin spin controllers will position Prime Minister Victor Chernomyrdin as the likely successor--perhaps within a year.

That's not to say he expects easy sailing. ''Volatility will be severe,'' he says, and he sees 5% daily market swings in Russian equities continuing for some time. In September, Red Tiger sank 8%, in line with the decline of the Moscow market. But Bokor-Ingram hopes a new Moscow office with two full-time researchers will continue to scope out equity picks ahead of the pack. And he'll continue traveling five or six times a year to places like Samara. From such expeditions will stem even more harrowing travel tales. For now, though, they're also delivering impressive results.

By Bill Javetski in London


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Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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