Dmitriev to Putin: “We bring smart money in here, the money of those who have great faith in Russia”

RBC Daily, 27.03.2012

The Russian Prime Minister Vladimir Putin met with Kirill Dmitriev, the CEO of the newly established Russian Direct Investment Fund (RDIF). Dmitriev assured Putin that the Russian middle class has tripled in size over the past five years, and this is very encouraging for foreign investors. As is "the fact that Russia remains stable following the elections”. Contrary to the cliche, foreign investors seek to increasingly put their money to work in the Russian regions, rather than in Moscow or St.Petersburg.

Vladimir Putin congratulated the CEO of the Fund, which was registered in January, on concluding a billion dollars worth of first transactions. The premier asked about RDIF’s cooperation with foreign partners. "Last year we met with their representatives in Moscow (the meeting was attended by investors managing over two trillion dollars in total - RBC Daily). The mood was constructive and positive. And, most importantly, what about your work with potential direct investment? What about your potential partners?”

Dmitriev said that out of one billion dollars already invested, the Fund directly contributed USD200 million, while USD800 million came from the partners. "It is very important that investors are actively bringing their money to Russia,’ RDIF’s CEO said, adding that “the main principle of our fund is that we invest our money when we receive at least the same amount from our co-investors.”

Russia has managed to accomplish what takes years in many countries, Mr. Dmitriev explained. “We have established a professional team very quickly. Our Advisory Board includes leading international investors, such as the heads of the sovereign wealth funds of China, South Korea and Kuwait and celebrities of the investment business, such as Leon Black, David Bonderman and Apax CEO Martin Halusa.”

Dmitriev stressed that RDIF does not pay anything to these international business sharks. “Their membership in our council reflects their interest and faith in Russia. They praise Russia for the fact that its middle class has tripled in size over the past five years.” Investors are first and foremost attracted by opportunities in the Russian regions, RDIF’s head went on to say. The Fund has just recently taken a tour of Russian provinces together with investors. “Importantly, we also entered into an agreement with China Investment Corporation to invest one billion dollars,” Dmitriev said. “Mr. Dmitriyev (head of Vnesheconombank) and I have just visited the Middle East, where one of the leading local sovereign wealth funds wants to invest in all automatic co-investment transactions of our fund. That is participating in all our transactions, which is unprecedented!”

RDIF’s CEO then told the premier about the transactions that have already taken place. The first investment was made in the integrated MICEX-RTS stock exchange as an indication that investors have faith in the Russian financial market, and to attract an important co-investor, EBRD (European Bank for Reconstruction and Development), before the stock exchange’s IPO. The second deal was one of the biggest in the power sector market: USD625 million invested in OGK-5, of which RDIF contributed USD140 million, while the remainder came from co-investors. The proceeds of USD625 million went to Inter RAO to finance its investment programme. "The third deal is a tentative agreement with the world’s biggest investor in healthcare that wants to invest private healthcare in Russia. The entire amount will be spent on developing clinics and upgrading medical services. To sum up, we are operating across many industries and are bringing smart money to them. This money is invested by people who have a great deal of trust in Russia.”

RDIF is also exploring opportunities abroad as Europe is undergoing a crisis and prices on assets have taken a dive, the Fund’s CEO admitted. “We are discussing some point strategic investment deals in Europe that may be of interest to Russia strategically, with the United Aircraft Corporation”, Dmitriev said. In his view, investors are also encouraged by "the fact that Russia remains stable following the elections”.