LONDON (Reuters) - The state-backed Russian Direct Investment Fund (RDIF) is expected to receive over $1 billion in new capital from the government by the end of 2017, its chief executive said.
The RDIF was set up in 2011 to buy stakes in companies alongside foreign financial and strategic investors. It can invest up to 20 percent of its capital outside Russia.
It has reserved capital of $10 billion under management and another $30 billion in commitments from foreign partners. It has co-investment ventures with several other sovereign funds, including those of China, Qatar and France.
“We do expect more capital injections in 2017 and the government is considering giving us some stakes in companies,” RDIF’s chief executive Kirill Dmitriev told Reuters in an interview cleared for publication on Tuesday.
“We expect over $1 billion before year-end.”
President Vladimir Putin said in June that Russia planned to boost RDIF’s capital.
Dmitriev said there had been discussions on transferring some government stakes in companies to RDIF to manage given its successful track record, but nothing had been finalised.
Dmitriev spoke to Reuters ahead of an initial public offering by Detsky Mir, a Russian children’s goods retailer, which is expected to price on Wednesday.
Dmitriev said it was an “important milestone” that he expected to open the door for many other Russian companies to list.
The Russia-China Investment Fund (RCIF), the RDIF’s co-investment vehicle with the China Investment Corporation (CIC), held a 23.1 percent stake in Detsky Mir but plans to sell up to 10 percent into the IPO.
This is expected to generate an internal rate of return of more than 90 percent in dollar terms, a source close to the placement said. It would be the RCIF’s first partial exit from an investment.
Dmitriev said the RDIF might make more disposals this year, also partial ones, as he thought the Russian market still had room to grow.
Concerning other strategic partnerships, he said the RDIF’s joint venture with the Qatar Investment Authority (QIA) had invested $500 million across transactions in the financial, retail and mining sectors and in infrastructure.
The QIA pledged an initial $2 billion to invest in Russia jointly with RDIF. Dmitriev said it had agreed to increase the size of its automatic pro-rata contributions to each investment.
“That was a significant development for us,” he said, without providing a percentage.
The RDIF and Saudi’s sovereign funds were seeking further co-investment opportunities in Russian infrastructure and agriculture, while the Russia-Japan Investment Fund, a joint venture with the Japan Bank for International Co-operation, was expected to make some key investments this year.
Reporting by Claire Milhench; editing by John Stonestreet