Franklin Templeton, a big U.S. money manager known for astute but aggressive bets in the sovereign debt market, has emerged as the dominant bankroller of Ukraine despite the country teetering on the edge of an economic crisis.
The investment group has snapped up Ukrainian international debt with a face value of almost $5 billion at the end of August, nearly a fifth of the country's outstanding international government bonds according to data gleaned from Bloomberg.
The investments have been directed by Michael Hasenstab, who was also the architect of Franklin Templeton's massive purchase of Irish debt, which helped calm the country's financial markets in the wake of the euro zone crisis.
Mr Hasenstab's Irish bet has contributed significantly to Dublin's rehabilitation in bond markets – and has so far paid off handsomely for Franklin Templeton – but the Ukrainian move is potentially even riskier.
The country is struggling with a weak economy, a large budget deficit and a current account deficit that is rapidly eroding the central bank's currency reserves to mere months of import cover.
The cost of insuring against a Ukrainian default is among the highest in the world, and most analysts and investors expect it is only a matter of time before Ukraine either succumbs to an International Monetary Fund program, a Russian rescue package or crashes altogether.
"They face a currency and funding crunch, it's as simple as that," said Paolo Batori, a senior strategist at Morgan Stanley.
"The trigger point could come tomorrow, it could come next week, or next month. But Ukraine is simply not equipped to deal with another wave of outflows. It needs the help of a third party, whether that is Russia or the IMF," he said.
Kiev is facing mounting pressure from Russia as it inches towards forging closer relations with the EU. The possible signing of a free-trade agreement with the EU later this month could help pave the way for an IMF deal and in the longer run provide a fillip to the economy.
But in the short term, Ukraine's future looks uncertain. Underscoring the country's rapid deterioration, Fitch Ratings, one of the major agencies that assess the creditworthiness of countries and companies, cut Ukraine's grade to B- on Friday, deep in "junk" territory, and warned that the outlook was still negative.
The downgrade further rattled the country's financial markets. The benchmark 10-year Ukrainian bond yield – which moves inversely to the price – rose to close to 10 per cent on Friday evening.
"If Ukraine fails to sign the [EU agreement] I think they face a real risk of a full-blown economic and financial crisis," said Timothy Ash of Standard Bank. "The economic options are narrowing fast."
Franklin Templeton has held most of its Ukrainian bonds for some time, but Mr Hasenstab increased its exposure even further this summer, buying $171 million of a big bond due in 2023, according to filings.
Analysts said this helped contain the rout in Ukrainian bonds this summer, after the U.S. Federal Reserve said it planned to scale back its monetary stimulus program, which triggered a wave of declines across emerging markets.
Local Ukrainian press have reported that Serhiy Arbuzov, Ukraine's first deputy prime minister, and Yuriy Kolobov, the finance minister, earlier this year made an unofficial visit to Franklin Templeton's San Mateo headquarters to reassure the country's biggest creditor.
The asset management group declined to comment.