Vasily Konovalov

NRFC investment boutique co-founder Vasily Konovalov told the AR WORLD LUXURY GUIDE editorial office on his secrets of a successful investment and his plans of transformation of the financial service market.

AR: Vasily, you got into the investment business industry in the early 2000s, when this sector had only started to develop in Russia. At this time, most of Russians didn’t know a thing about stocks and stock exchanges. Why did you choose this way?

V: Well, I made this choice even sooner, when I was studying economics and investment at the university. I just happened to ensure myself at the age of 18. I was lucky to have a chance to get into a project work in one of the most innovative Russian brokerage companies which is Finam holding. The project, where I was one of the participants, was highly valued and I got a position. I was able to get adopted to the financial sphere immediately due to my mathematical mindset. At that point I took a plunge into the world of investment and felt that it is a matter of life for me. This was a period of rapid growth of the Russian market, but few years later, the global financial crisis occurred in 2008. At that point it got clear that no previous achievements could guarantee future success, In the world of investments everyone thinks in future terms. You have to always follow trends emerging daily.

AR: During a long period of time you have been taking top positions at big investment companies of Russia. Was your decision to leave from the corporate environment in 2019 with your college Petr Bubnov spontaneous?

V: At Finam I had stayed for more than 15 years, this was almost my second home. I got used to the people and methods of doing business, so the decision was very hard to make. But sooner or later, I needed to get out of my comfort zone, if I wanted to grow. And I have never regretted my leaving for entrepreneurship.

AR: What hardships did you have to come across when establishing your investment boutique?

V: The major hardships were associated with the fact that we began it as startup. There was an idea, understanding that we could be helpful for our investors with our own expertise, but simply nobody knew about us. Or almost nobody. Yet for the previous periods of work at other places we had developed trustful relationship with a number of clients who preferred further co-operating with us. It was our “foothold” from which we tried to understand what progress direction to take. We decided not to take an ordinary path: we did not to try to obtain a brokerage license or to attract investors by the expensive advertisement in the net. Actually, a lot of big businesses had been acting in our segment and we were not able to propose something unique. Therefore, we chose the expert status keeping in mind that the main point in our business is confidence.

We concluded partnership agreements with leading Russian and western brokers. At the moment we’ve been dealing with 6 official partners- such domestic “pillars” as “Otkrytiye Broker”, “Alfa Direct”, “BKS Mir Investitsiy”, Freedom Finance, besides, the two American investment structures as Interactive Brokers and Mindrock Capital. Our appearance as experts in some popular Russian Media and YouTube channels has excited interest among new clients. We also entered some communities connected with investments. We were chosen as experts to Skolkovo MBA graduates’ community. Now we are official financial experts of Atlanty Business Club.

AR: How do you attract clients?

V: First of all, by excellent business results. The year of 2020 was very successful for us. We demonstrated amazing results for our investors and as a sign of loyalty we got a certain networking. Currently about 60% of new investors appeal to us based on recommendations. A certain community of interests has been set when a satisfied client brings about several other counterparts from his social circle who in their turn recommend us to their acquaintances. Thus, for incomplete 2 years since the company was founded, we have been controlling our investors’ resources at the amount of almost 100 million dollars. And the growth rate of our clients’ portfolio has been constantly increasing.

AR: What deal do you consider a successful?

V: Judging from our 20-year experience, we have never divided deals into successful and unsuccessful. Investing is an ongoing process. We accept every deal as it is. Every reasonable investor keeps in mind that investments are closely connected to risks and it is not possible to benefit from every deal. We try to minimize an emotional respond. There is a detailed decision-making mechanism on what deal we are involved and what we are not. There are solid parameters, based on which we understand that we need to dispose an investment, even if it seems beneficial. Regarding the history of IPO portfolio, that is the most popular among our clients at the moment, we can be stated that 116 deals we have made and 110 deals out of them were profitable.

AR: How do you select objects for transactions?

V: We prefer a situational approach. There is no universal method, that would be always useful. If we earn good money on the IPO market from high-tech business stocks, it is not a fact that it would be so profitable in a couple of years. We have been always trying to be several steps ahead and forecast variations of different scenarios and big scale trends in the market. We have been succeeding yet. In summer 2020 we enlarged our product range by introducing private equity sector in the US market. This were the investments to private businesses at the American market, that are being prepared to enter the stockmarket. We suppose the trends of investing to private businesses to develop further. In that case we are in trend, our investors have shares in the stocks of such companies as AirBnB, SpaceX, Courcera, Udemy, Momentus, Discord, Kraken, People.ai….

AR: What other promising perspectives of investing do you see?

V: The world has been moving towards multiple increase of information flow. On the other hand, traditional capital saving and increase methods have ceased working within the recent years. It is associated with macroeconomics. The majority of Central banks have reduced their rates to zero and now deposits bring zero or negative return rates in real terms which don’t cover inflation rates. In Russia a heavy growth of investments is being observed expressed in multiple growth of private investors’ number. Two years ago, they were estimated at 3 million people, now they are over 9 million. At the same time due to economic and political issues private investors’ interest has been shifting from Russia to the US market. Hi-tech businesses, especially in IT, biotech, hi-tech agriculture have been gaining popularity. The 4-th scientific and technological revolution has been ongoing before our eyes while traditional economics has gone to the backgrounds.

AR: What should one start investing from? What errors should be avoided?

V: The basic hardship for a beginning investor lies in the fact that investment world is much more complicated than ordinary bank products. First, it has a lot of details and it is not always clear how to start, distribute capital correctly, how to avoid silly errors and amateurish mistakes. As per statistics, more than half of new investors fail, lose a part of their capital, get disappointed. Commercial banks noting considerable customers’ outflow because of low deposit rates try to sell them investment products paying little attention to their educating and risk control. While market situation is favorable, we observe a multiple growth of investors’ number. And the rate keeps growing. Most likely by the end of 2021 the number of investors would have grown to 15 million. But among this number highly qualified professionals are in minority. The other people are offered Apple or Amazon shares to start “earning” immediately. It has been working unless the market is growing, but the market could turn down any time and considerably decline. And then unexperienced investors inevitably get disappointed.

In NFRC quite a different approach is suggested. There is no need to chase instant profit. It is important to take time for education. A lot of big brokers propose excellent training courses on financial marketing, they are short-term and, in some cases, free of charge. The main thing to do after elementary education is over is to find a reliable partner who won’t have a conflict of interests with an investor and who adapt him correctly on the initial stages. One of NRFC competences is to provide investors with a type of investment navigator. By that we solve their primary issue – eliminate a conflict of interest with a broker.

AR: Do experienced investors need assistance from consultants and NRFC company?

V: Generally, every experienced investor has faced lots of challenges in typical brokerage services. He has already tried different standard policies and had a frustrating experience. NRFC company holds an expertise on complex financial products. We are an independent company and we don’t a have an interest of suggesting the potential investor those products that are most profitable for a broker. We have been trying to offer the best possible variant for an investor judging by his own equity parameters. So, the portfolio support is vital for experienced investors as well as for amateurs.

AR: What is your advantage as experts?

V: We consider our strongest point to be the expertise on the venture market which in a great demand at present. Our broker partner in this product is Freedom Finance. Consequently, we possess the 2 strong competences that are in demand even among experienced and tough investors. The major one is transaction selection. What is IPO transaction? It is a primary stock biding of non-public businesses on the stock market. Recently high-tech companies from IT segment developing machine learning, 3D printing, medical and biotechnologies, working out treatment methods of earlier uncurable diseases, producing trendy technological food stuff have been a success. Every separate investment product implies a lot of risks part of which could be latent. Our competence means risk mitigation for investors and maintaining their maximum profitability.

AR: How do you see NRFC in 5 years?

V: We are sure that we will not act as stockbrokers, who have a direct access to a stockexchange. We consider our company a fin-tech project. During the 2021 we are planning to register 2 investments funds, most probably, in the USA and Switzerland. Private equity deals will be accessible worldwide, especially in the US and other high-tech startups in the Silicon Valley via such investment funds. Moreover, we are planning to create a variation of investment products, that don’t exist on the Russian market. For example, a mobile aggregator app of several brokerage accounts. More than a half of Russian investors that have been in this sector for more than three years, have got several brokerage accounts in different companies. It is very inconvenient for investor to have several entry points, trading apps, sites with different passwords and isolated recognition of assets. We have been developing an app, trade aggregator, where an investor will have an eye on his accounts in different companies, will be able to trade from different accounts, obtain summary portfolio analytics and add extra options from brokerage companies. This is entirely fin-tech. Our goal is to become one of the leading tech company on the Russian financial company, thus, act strictly according to the current legislation.

AR: What is the most valuable thing in business for you?

V: Creativity. The process of earning money does not satisfy me or brings me joy. I don’t have a target to reach 1 billion dollars on my account. Our goals are a bit different. Our business - NRFC company is created like a story of capitalization increase, but not as instant profit one. I want to leave a visible mark, that will transform the Russian financial market to the best international standards. I can clearly see the main value of business - we make new demanded products, that bring an excepted outcome for the investors. As a result, our business grows and develops in the right direction. But a financial success is a result of properly set goals.

AR: Do you consider yourself a successful person?

V: I often ask this question to myself. I sometimes do feel like I am successful, sometimes I don’t. It’s just a game, that helps me to be motivated. After a successful deal, I feel victorious, but for a very short amount of time. Then new challenges, new goals appear. It doesn’t matter what happened yesterday, what really matters is what situation we have today and will have tomorrow. It really feels on the financial market. Money has no past cost. The most important value of investments is an opportunity to get more in future. If you stop - you lose!

A few words about the company: NRFC investment boutique is a «personal concierge» in the world of finance. Noble Russian Finance Club has been developing individual investment plans to fit every investors parameters, molding investment portfolios from the best financial products on the market and choosing the most reliable way of achieving financial goals with minimum risk avoiding conflicts of interest.

ANNARUSSKA PRODUCTION

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