russia

Large Funds Raised Prior to Russian Investment

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February 24, 2014

Russia is seen as one of the world’s “sleeping giants” when it comes to private equity (PE) investment. Despite being the world’s largest country, the sheer vastness of the nation means that PE investment goes one of two ways. It either is spread thinly across the whole country, or is focused on the big cities in the west of the country.

 

As you head east, towns and cities that are vastly improving their infrastructure, such as Kazan, and better links with Kazakhstan, in particular, and other ex-Soviet states are helping to drive PE deal seekers to the east.

 

Such opportunities have seen Russia develop into a true PE emerging market, and consequently many PE firms are focusing their fundraising on the area.

 

Forestry and infrastructure development are likely to be the two biggest opportunities, especially in the eastern areas of the country, although Russia is still likely to yield a large volume of natural resources in the coming years.

 

How much foreign investment Russia is able to attract will likely depend on how much these markets will be open, and not closed to internal, national investors only, as they have been historically. PENews.com reports three PE firms in recent months have closed or started raising funds that will be distributed in Russia and the surrounding area.

 

These funds were:
– Paris headquartered UFG Private Equity, who invest in Russia, Kazakhstan, Ukraine, and Belarus, raised $200million (First close, total fundraising target $350million).

– Russia Partners, of New York and Moscow, have started fundraising with a $750million final close target.

– Aton Capital Partners are provisionally targeting $120million and are reportedly speaking to individual and corporate investors to try to raise this money quickly.

 

Despite the investment opportunities in Russia being clear, fundraising in the country has been slow in recent years, with many funds focused on the country struggling to raise even the relatively small sum of $100million, according to Preqin. However, with doubts over the sustainability of emerging markets growing, it appears PE firms will be holding their nerve and exploiting the opportunities that other types of investor are looking to move away from.

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