$10 billion investment fund discussions attract major investors

Russia Today, 19.05.2011

Representatives of major global investors worth more than $2 trillion met with Russian Prime Minister Vladimir Putin, ahead of the launch of a $10 billion Russian investment fund at the St Petersburg International Economic Forum.

The fund, which will see the state commit $2 billion per year over five years, and co finance up to 20% of the cost of development projects, will be headed by former Icon Private Equity president Kirill Dmitriev. Speaking with RT Business at the meeting Dmitriev said the plan of the fund was to attract up to $90 billion of international funding to Russia on a long term basis. ??

“Our goal is to attract $50 to 90 billion of co-investments from the leading funds in next 5 years. I think that it’s really important for them to get a good rate of return in Russia and in this way they will keep investing. And today the confidence that was given to investors by Prime Minister Putin is a catalyst that will help to significantly increase the investment inflow into the Russian economy.” ??

The plan for the fund was announced earlier this year by Russian President Dmitry Medvedev, who is promoting moving the Russian economy away from its dependence on commodity, particularly energy exports. ??Amongst other major investors, senior figures from Goldman Sachs, Blackstone, Abu Dhabi Investment Authority, Kuwait Investment Authority, China Investment Authority, Permira and Caisses des Depots attended the discussions. With Russia generally seen as a higher risk investment destination, it warrants higher premiums and is considerably more volatile than senior economic figures would like. ??

Bader Mohamed Al-Sa’ad, Managing Director of the Kuwait Investment Authority, said that he thought the move by the government to create the fund would encourage more conservative longer term, investors to an economy that he saw on the frontier of growth. ??

“We think that Russia has all the factors and all the capabilities to be a frontier in the growth market. For us in KIA, we have something like $600 million investment, and I think this invitation to join the direct investment fund will give us the opportunity to increase our direct investment. We think that there is a lot of interesting companies – there is interesting sectors in Russia. This will give us the opportunity, and the confidence, because we think the government would commit $10 billion – this is a unique concept in the private equity investment. This is probably for us, a conservative long term investor, it will give us the comfort to join the Russian government jointly at the same terms to be investors in the Russian economy.” ??

Laurent Vigier, Director of European and International Affairs, at Caisse des D?p?ts Group said he thought the proposals could play a key part in broadening the perception of investing in Russia. ??

“What you see is that Russia is not only an economy based only on gas or oil. Russia has a very educated population, very smart people, and there are many sectors of interest. We have seen in the agribusiness, in the pharmaceutical industry, in the aeronautics and the infrastructure, there are many opportunities in Russia. We have to change our view on this country it is a diverse economy it is a major partner, and for Europe and for France, this is certainly something we have to factor in.” ??

Vigier added that the proposal by the government to commit large scale funding to attractive private and institutional investors from around the world had received a positive reception. ??

“I think that all the participants at this meeting were very impressed by the dedication of the Russian government to promote long term investment in the development of the Russian economy. The Russian economy appears certainly to be the next big thing on the global investment map. We have to seize these opportunities and it’s a bold movement by the Russian government. This new scheme is very innovative.” ??

At the meeting the investors discussed Russian economic strategy and its investment climate with the Prime Minister, as well as particular investment interests. Spokesman Dmitry Peskov indicated that no formal commitments had been made but ahead of the meeting the head of VEB, the state development bank (Vnesheconombank), Vladimir Dmitriev indicated one group, unspecified had already indicated it would look at allocate $1 billion to the fund.