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6 September 2022

Makar Paseniuk, ICU Founding Partner


Written by Yuri Bender for FT's PMW. Original article is available here.


Ukraine’s investment industry is working hard to ensure the country’s economy does not collapse in the face of the Russian invasion, says ICU’s Makar Paseniuk.


Back in September 2018, when Ukraine was enjoying a relatively optimistic period, a day of intense discussion, hosted by asset management firm ICU at the genteel Bristol Hotel in the Black Sea port city of Odesa, attracted government ministers, foreign economists and the cream of the country’s financial industry. Animated chatter between sessions highlighted investment opportunities in strategic but colourful companies such as helicopter manufacturer Motor Sich, agricultural giant Mriya Agro Holding and Ukraine’s largest commercial bank, PrivatBank.


A more relaxed atmosphere saw evening delegates donning party attire in the city’s Azuma restaurant, famed for its Oriental cuisine. At the centre of discussions and celebrations was the slim, smart-suited, bespectacled figure of Makar Paseniuk, known in Ukraine for his calm demeanour and astute investments.


Right up to the Russian invasion of February 2022, he played down any talk of war, reluctant to contribute to any sense of panic. Even today, he observes the critical situation in his country from a reasoned standpoint, not allowing intense patriotic emotions to boil over, while keeping the safety of employees and their families as number one priority.


“In January, when tensions started simmering, we instructed employees to prepare for escalation of Russian aggression against Ukraine to secure their safety,” says Mr Paseniuk, whose investment house manages $500m in assets. He continues to pay his 100 staff whether they have moved to the western city of Lviv to carry on the firm’s business dealings, or have elected to stay in Kyiv, to defend the capital with sandbags, rifles and Molotov cocktails against the invading Russian army.


“We never believed this war would happen,” he admits, assuming the intensive build-up of Russian troops on Ukraine’s border to be political posturing in a bid to obtain geopolitical concessions from the US. “It was a shock for everyone.”




His second responsibility is to carry on ICU’s work as an investment firm, making sure his country’s economy is not derailed under enemy attack. “It is our priority to maintain business as usual for clients and help our country with everything we can do as financial professionals,” says Mr Paseniuk, demonstrating a rational, market-oriented response to crisis.


Thanks to the pandemic, staff were already working remotely. Several years ago, when his investment team identified Ukrainian start-ups – including virtual clothing try-on app 3D Look and PetCube, a video-based service connecting pets with humans – as key beneficiaries of his operation, he also invested in the technological infrastructure of the Kyiv-based investment house.


While more than 4m refugees have left for surrounding countries, with 6.5m displaced internally, the efforts of Mr Paseniuk and peers in the investment industry, supported by advanced IT back offices, have ensured Ukraine’s economy has not collapsed.


“The banking system has proved extremely resilient to this unprecedented crisis, triggered by the war,” says the man once known in Ukraine as ‘Poroshenko’s banker’ for advising former president Petro Poroshenko on the financial direction of his Roshen confectionary business. “Banks continue to operate in all regions not directly hit by fighting, and the majority of banking services remain available to customers all over Ukraine. There has been no bank run in Ukraine, nor any sign of panic.”


His investment team continues to put clients’ money to work. “Our company is doing its best to make sure retail and institutional clients continue to have uninterrupted access to our trading infrastructure, research and professional advice,” he says calmly. “Since the outbreak we have seen huge demand for military bonds from retail clients.”


These government bonds, issued by the Ministry of Finance, mature after 12 months, financing the Ukrainian army and the nation’s war efforts, currently yielding 11 per cent.


“This is the most patriotic financial instrument we have ever been involved in,” enthuses Mr Paseniuk. “Even though they are issued on non-market terms and real yields, given the expected inflation, are negative, our clients are still willing to invest. They believe it is their investment into the future of the country rather than investment for financial gain.”


As a broker, ICU immediately decided to sell these bonds without commission, investing its own money into market infrastructure, to enable clients to purchase bonds in real-time, through its proprietary trading platform, ICU Trade.


“We feel it is our duty as Ukrainian citizens to promote this instrument and raise funds for the state budget,” he adds. It is a matter of pride that ICU is overseeing 30 per cent of all exchange transactions of military bonds in Ukraine by volume and more than 60 per cent by number of deals. “We will work hard to further increase these numbers and help our country.”




Central to helping Ukraine maintain independence from an expansionist Russia is maritime security and protection of ports. Odesa remains the lifeline to the outside world for trade purposes, especially now that the Russian military has destroyed the city of Mariupol on the Azov Sea. The latter was “reduced to ashes” with “tens of thousands” of civilians slaughtered, according to Ukrainian president Volodymyr Zelensky.


“Maritime ports are a crucial element in the Ukrainian economy,” says Mr Paseniuk. “Of the country’s agriculture and metal exports, 90 per cent were shipped by sea, equivalent to 50-60 per cent of Ukraine’s total exports. It would be almost impossible to substitute sea exports by rail in the short term.”


Much investment in Ukraine since independence has been tied to this shipping of commodities from agricultural and industrial plants, often linked to oligarchic clans, whose business dealings are intertwined with political interests.


But while acknowledging the economy’s massive reliance on grains and cereals, observers sometimes criticise ICU for ignoring this “real economy”. Mr Paseniuk believes the start-up sector his firm was investing in before the war will eventually gain greater prominence.


“The war will accelerate these structural changes in the Ukrainian economy,” he says. “Those sectors based on natural resources have limits to their growth and I think they are close to their limits in Ukraine. They are very unlikely to drive economic growth and transformation in the future.”


Even before the war, the Ukrainian growth engine was fuelled by millions of professionals who now create value digitally rather than physically. “This trend will definitely strengthen in the aftermath of the war,” he maintains.


“Unlike physical assets, which are critical to the industrial sector, intellectual potential cannot be destroyed by war. That’s why I expect the focus of the post-war growth will be on low-capital-intensive and adaptive sectors, including digital technologies.”


In addition to investment in high-tech projects, Mr Paseniuk expects this brutal war to accelerate interest in environmental, social and governance investing. “Russia’s war on Ukraine and the related sanctions imposed on Russia has taught some unpleasant lessons to the global investor community,” he explains. “The global ESG philosophy is now being enhanced with a new component, which is ethical and moral values, pursued by sovereign issuers.”


Although this component was always present and a consideration for investors in fixed income issues, it has previously been hidden and never clearly articulated. “In the coming years, we will see a new reality where any exposure of large public investment funds to non-democratic regimes will be subject to moral scrutiny,” says Mr Paseniuk. “I believe the investor universe that will treat Russian or similar assets as acceptable will shrink significantly.”


As always, the prognosis from Mr Paseniuk is calm but forceful. “He is a systematic, global thinker, one of the cleverest financiers in Ukraine,” says one Kyiv commentator. Moreover, he has survived the political machinations which have destroyed many Ukrainian rivals and expects to survive the Russian military onslaught too, to organise future summits in Odesa once more.


“Recent public opinion polls show more than 90 per cent of Ukrainians believe in victory. They will have the same dedication rebuilding the country as they now have fighting for the country’s independence,” says Mr Paseniuk. “Ukraine is now in a unique situation of nationwide unity and aspiration for the bright future it sees in Europe.”




For further analysis of how Russia's invasion of Ukraine impacts global wealth management, please visit the PWM website: