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FACTBOX-The Russian Direct Investment Fund

Source: Thomson Reuters Foundation - Mon, 13 Jun 2011 10:25 AM
Author: Reuters
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June 13 (Reuters) - Russia will launch a ${esc.dollar}10 billion state-backed fund at the St Petersburg International Economic Forum this week that will co-invest with sovereign wealth and private equity funds in Russian companies.

For a story: [ID:nLDE75C084]

The goal:

The fund is being set up to kick-start direct investment in Russian growth companies operating in sectors like IT, healthcare and infrastructure -- but not energy -- that are a play on the emergence of Russia's middle class. The RDIF will be capitalised with ${esc.dollar}2 billion a year over the next five years.

It would invest ${esc.dollar}50-${esc.dollar}500 million in deals as long as outside investors at least match it, dollar-for-dollar. It would have an investment horizon of 5-7 years. That means the fund itself would not own controlling stakes in businesses, but it could do so along with its investment partners.

Investors:

The fund targets sovereign wealth and private equity funds with at least ${esc.dollar}1 billion under management. It also seeks to partner strategic investors; companies with market capitalisation of at least ${esc.dollar}1 billion, or annual sales of ${esc.dollar}1 billion and EBITDA (earnings before interest, taxation, depreciation and amortisation) of ${esc.dollar}150 million.

The structure:

The fund will be a 100 percent subsidiary of state development bank Vnesheconombank, but have an independent governance structure and investment review process.

Its main focus is Russia but it would be allowed to invest 20 percent of its capital outside the country. The approval of at least 75 percent approval of its supervisory board and investment committee would be required for this.

Management:

The fund will be headed by Kirill Dmitriev, who has co-run Delta Private Equity Partners and is stepping down as president of Icon Private Equity, a ${esc.dollar}1 billion fund, to take up the new position.

Dmitriev will hire a 30-strong investment team and expects the fund to do its first deals in either the fourth quarter of 2011 or the first quarter of 2012.

(Reporting by Douglas Busvine)?

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