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Sherpas from Vnesheconombank

2011-04-08 Parameters of the fund, which the Development Bank creates to attract foreign money into the Russian economy became known to “Vedomosti”. This year it intends to invest $ 4.9 billion, of which the state will give $ 1 billion.Russian Direct Investment Fund will not be the traditional sovereign fund, said Vnesheconombank Chairman Vladimir Dmitriev: it will be a classic direct investment fund (private equity), «an additional public tool for financial investments."The Fund will be established by June 1, President Dmitry Medvedev instructed the government and Vnesheconombank. He's going to present it in June at a forum in St. Petersburg. Ministry of Finance plans the allocation of 62.6 billion rubles from additional budget revenues this year from high oil prices, according to the Finance Ministry materials. During five years the state will allocate $ 10 billion to attract $ 60-90 billion of related investments for 10 years.To understand the idea of the fund Vnesheconombank "previously, but thoroughly" discussed its model with long-term investors with assets of $ 3.2 trillion (see the list of investors www.vedomosti.ru). Russia is not a priority direction for investments and it is losing the fight for capital; the opinion of one of them cites Mr.Dmitriev: "They said to us: for most investors there is no longer BRIC there is BIC.”It turned out that it is convenient to work with direct investment fund for companies and funds, but only if you have experienced Russian co-investor who is an agent of the state, shares his impressions from the talks Mr. Dmitriev: "The flag of the state in the face of Vnesheconombank is very important, because foreign investors feel not quite comfortable in Russia due to bureaucratic system of relations, corruption, and simple ignorance of the situation.” Russian Direct Investment Fund will provide comfort in the form of state obligations to co-invest and share risks. Another desire of investors is that the state should be the only partner in the fund, says the head of Vnesheconombank.Russia is called the Wild West because of the lack of laws, said the partner of a major U.S. investment fund that has investments in Russia to the WSJ: "We are working with countries around the world, but it is doubtful that anyone will allocate billions of dollars." "There is no much interest in such things no matter what Russians think" - he said.Finally, corporate governance should be transparent and simple. The Fund will be established as soon as possible in the form of closed-end unit investment fund, promised Mr. Dmitriev. There will be no officials in the Management Company and board of directors, he promises: "Most likely there will be investment professionals, who are well-known to the market." The board of directors should respect the principle of noninterference of the state in the affairs fund, said Mr. Dimitriev, “not even to have feeling of the implementation of policy transactions”. He did not tell us who would head the council.Most of the staff of the management company would be foreign experts, but they will not work for competitors, Mr. Dmitriev continues: "We will avoid any hint of conflict of interest."International advisory council will be established by the fund. Mr. Dmitriev refused to talk about personalities, vowing that it will be prominent figures – “politicians, academics, gurus of investment community, and representatives of international financial institutions.”Although Russian Direct Investment Fund is focused on foreign investors, it will not be closed to the Russians promised Mr. Dmitriev: "We do not shut out that some investment companies with Russian jurisdiction would participate in the fund in the interests of Russian and foreign investors. The more investments, the better. "Investment declaration is not yet written. Now it is clear that Russian Direct Investment Fund will purchase packages of up to 25%. Minimum amount of investment will be limited to $ 50 million, and the maximum risk of one project will be $ 500 million (5% of fund size), designated Mr. Dmitriev. The average size of investments will be $ 200-300 million, as it was calculated in Vnesheconombank, it is 30-50 deals for 10 years.Expected rate of return is more than 20%, investment horizon is 5-7 years. Output of Vnesheconombank from the project will depend on shareholders' agreement, said Mr. Dmitriev.According to him, the fund is not interested in investing in mining, it will focus on investments in modernization projects (eg, aerospace, pharmaceuticals, medical equipment, IT)."We look forward to establishing of a fund and the emergence of the first projects this year", - says the presidential aide Arkady Dvorkovich. Real investments will be small this year, he said.Mr. Dmitriev also going to invest $ 1 billion by the end of the year, "there is already first estimation of projects."There should not be any rush with the investment of $ 1 billion, warns the managing partner of “Altera Capital” Kirill Androsov, good projects in a range from $ 50 million to $ 500 million could be found, but there are almost no structured ones and there is stiff competition for the existing projects. "If by the end of the year the fund makes its first investment, I would consider it a very good result", - he said."To attract in Russia $ 3 billion a year is a very difficult task, no one team still cannot achieve this result," - says managing partner Quadro Capital Partners Fund (2 / 3 of the fund is foreign capital) Giedrius Pukas. In his opinion, Vnesheconombak will have to answer questions of investors about their track record, why would they do commercially profitable deals, but not those that are needed to state: "SC will have to prove that it is capable of making money." Vnesheconombank is experienced already said Mr. Dmitriev: last year, state-owned corporation started to invest together with Macquarie Renaissance Infrastructure Fund. So far it is attracted $ 630 million, including $ 200 million of Vnesheconombank; a deal for $ 125 million is closed.Author: Eugenia PismennayaSource: Vedomosti