French and Russian state-backed funds launch €1bn joint venture

Financial News, Private Equity News, 01.11.2013

The Kremlin-backed Russian Direct Investment Fund and the French government-backed Caisse des Dépôts International have launched a new fund to target deals across the two countries.

The Russia-France Investment Fund launched today after receiving backing from Russian President Vladimir Putin and French President François Hollande earlier this year.

The fund has around €1 billion to invest, according to a person close to the deal, and will seek investments across a broad range of sectors and asset classes, including equity and debt securities, infrastructure and real estate in Russia and France. It will have a “strong focus on opportunities promoting economic co-operation between the two countries”, according to a statement from the RDIF.

The fund was first announced in February, with Putin and Hollande signing a memorandum of understanding to start the process of setting up the fund.

At a joint news conference between Hollande and Putin at the time, the Russian president said: “French capital is present in almost all Russian industries. We expressed our desire to see Russian investors contribute more to France’s economy. We will use the opportunities offered by Russia’s Direct Investment Fund and France’s [Caisse des Dépôts] to this effect, and just signed a memorandum of understanding in this very room.”

The agreement follows a commitment by Abu Dhabi's Mubadala Development in June to create a $2 billion investment vehicle with the RDIF for long-term investment in a wide range of industries in Russia.

The RDIF, which counts Blackstone Group chief executive Stephen Schwartzman among its board members, was created in 2011 to attract foreign private equity investment in Russia. It is capitalised with $2 billion a year in state cash for five years for a total of $10 billion. Under its mandate, the RDIF is required to secure co-investment that at a minimum matches its own commitment.

Last year, the RDIF secured a commitment of $500 million from the Kuwait Investment Authority to co-invest in all RDIF deals. The RDIF and the China Investment Corp. also created a joint fund to invest in Russian private equity deals, with each side contributing $1 billion.

Caisse des Dépôts International is an arm of the Caisse des Dépôts investment corporation that was set up in 2008 to partner with sovereign wealth funds and other institutional investors.