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Russia: New fund seeks foreign co-investors

Launched in June, Russian Direct Investment Fund (RDIF) is an important part of the drive to modernise and diversify the Russian economy. It is another aspect of the government’s efforts to boost international investment in technology-intensive industries.

With $10 billion in pledged capital from the state, the fund is designed like a private-equity firm, but will focus on growth capital. RDIF will source buy-outs in Russia of between $100 million and $1 billion. However, it will only participate if it can bring in at least one co-investor from abroad.

"The benefit to Russia will be financial returns [on the state’s equity investment] and the chance to bring in more foreign capital and know-how to key industries and sectors.... It’s very important to have showcases of successful long-term foreign investment," RDIF’s chief executive, Kirill Dmitriev, tells Euromoney.

He admits it is a problem that many of the biggest private equity firms have yet to make their first investment in Russia. Globally, less than 0.1% of long-term investors’ funds targets private-sector Russian firms. "There’s a gap between the perception of Russia that foreign long-term investors hold and the actual opportunities. Most of those who have invested have made good returns, and they have come back for more. It’s the first steps that are scary," he says.

RDIF hopes to assist big long-term investors with their first endeavours in Russia and, as such, it will only contribute a maximum of 49% of each investment.