| ST PETERSBURG, Russia, June 21
ST PETERSBURG, Russia, June 21 Major private
equity and sovereign wealth funds on Thursday took tentative
first steps to invest in Russia, praising efforts to break the
economy's fixation on energy and become a more diversified, open
and less risky place to invest.
At a forum used by President Vladimir Putin to court foreign
capital, sovereign wealth fund the Kuwait Investment Authority
said it struck a $500 million deal to invest alongside the $10
billion state-backed Russian Direct Investment Fund (RDIF).
The RDIF fund, set up to partner with private equity and
sovereign funds and give them comfort about committing money,
also announced that it will launch a pre-IPO program with a
consortium of investors - BlackRock, Goldman Sachs and
Franklin Templeton. They will target Russian companies planning
to IPO on the Moscow stock exchange MICEX-RTS.
"Russia is no longer addicted to oil resources. We see
research developing and growing, science and industrial parks,
which is very good for attracting investors," said Lou Jiwei,
chairman and CEO of Chinese sovereign wealth fund China
Investment Corp, which oversees $410 billion.
CIC has also set up a venture with Russia to invest in
Russian and Chinese enterprises.
Putin, who had his first face-to-face meeting with major
investors since his election to a six-year term in March, said
the deals would "give fresh impetus to the Russian investment
Perceived as a corrupt country where the rule of law is
lacking, Russia has been trying to improve its image and boost
Giant private equity funds such as TPG Capital and
Apollo said they had seen noticeable differences in
Russia and stated their interest in doing further business in
"We at TPG have been the only major global firm that has
done any deals in Russia in the last decade - they've all turned
out well," said David Bonderman, the head of TPG.
"Doing business here is easier than you think from the press
reports," said Bonderman, who has an undergraduate degree in
Russian from the University of Washington and created a
fellowship program to sponsor hard-up students keen to travel
and expand their horizons.
TPG has invested in Russian bank VTB Capital and supermarket
Foreign investors have been searching for growth in
developing economies as the mature U.S. and European economies
A recent Ernst & Young survey showed increased appetite
among foreign private equity firms to invest in Russia.
According to the survey of more than 150 investors, 48 percent
of respondents said they expected to increase acquisition
activity in Russia in the next year as opposed to 25 percent six
"We look at Russia with a list of real pluses but also
negatives," said Leon Black, who heads up U.S. private equity
fund Apollo. Black said Apollo had done one successful
investment in the 1990s but since then has not done much in the
"On the plus, its blessed with unbelievable natural
resources, also it has a low level of debt, low unemployment,
nice growth (and) strong leadership. On the negative, there are
areas of antiquated infrastructure, a certain amount of
burocracy, and then there's the whole question of rule of law
and the judicial process."
Sergei Ivanov, the head of Putin's presidential
administration, said while there are some positives and
negatives to the economy, "what is most important is we need a
stable environment, predictable policy, and I'd like to assure
you we're using this course."