* Russia's state private equity fund has raised most funds
from Middle East, Asia
* China's CIC keen to commit more to Russia
* Russia's major investment forum has absence of large U.S.
(Adds Qatar investment)
By Megan Davies
ST PETERSBURG, Russia, May 23 Sovereign wealth
funds in China and Qatar on Friday signalled their increased
commitment to Russia, boosting Moscow's hopes of strengthening
ties with Asia and the Middle East as relations with the West
Major sovereign wealth funds in the Middle East and Asia
have invested in Russian businesses and backed its state-funded
private equity fund, the Russian Direct Investment Fund (RDIF).
By contrast, U.S. financial investors in the country remain few.
"CIC has invested several billions of dollars in Russia,"
said Ding Xuedong, chairman of the $575 billion CIC, on
the sidelines of the country's main annual investment conference
in St Petersburg.
"We will continue to increase our investment in Russia, not
only in the public markets, but in direct investments," he said.
Russia's RDIF separately announced that Qatar's sovereign
wealth fund, the Qatar Investment Authority, is allocating $2
billion to investments with the fund.
Numerous U.S. financiers avoided the annual investment
conference in St Petersburg on advice from the White House.
Washington and the European Union have imposed sanctions against
various individuals deemed close to Russian President Vladimir
Putin in response to the situation in Ukraine.
"In our platforms - we raised $10 billion from our partners
- around 90 percent came from Asia and the Middle East," said
Kirill Dmitriev, the RDIF chief executive. "Those longer-term
investors ... take a longer-term view on Russia. They see some
turbulence but realise it is impossible to isolate the
sixth-largest economy in the world."
Among those present on a panel discussion on Friday were
senior executives at Korea Investment Corporation and Kuwait
Investment Authority (KIA). European funds, facing less
government pressure than their U.S. counterparts, also showed
commitment to Russia.
"We think there is a lot of potential in this country," said
Laurent Vigier, CEO at France's CDC International Capital. "We
are looking actively at the moment at opportunities in this
country and are optimistic about the medium and long term."
Private equity firms have in general found Russia a tricky
place to invest, citing concerns about corporate governance, the
rule of law and finding a lack of opportunities. U.S. giant TPG
is the notable exception, making several times its money on its
investment in supermarket chain Lenta.
"The history of private equity in Russia is about 20 years
old - in that period we have had at least two tsunamis of global
political events and upheaval and we are now in the middle of
the third," said Drew Guff, founding partner of New York-based
Siguler Guff & Co, which has invested in Russia for many years.
"There were at one point 30 different private equity funds
raising money (in Russia) at the same time. And then the global
crisis of '98 came and the tsunami wiped out many of the
Anatoly Chubais, the architect of Russia's post-Soviet
privatisations, said a problem is that limited partners (LPs) -
the investors in private equity firms - use foreign money rather
than Russian investors. He said the solution was a major
restructuring of non-government pension funds.
"It's ironic when the entire private equity industry that
exists here, while investing in Russia, makes almost no use of
Russian LPs," Chubais said. "It is totally wrong and the
situation could be radically changed."
CIC, which invests in Russia directly as well as via a joint
venture with the RDIF, has a minority stake in Russian potash
company Uralkali and has done deals with the RDIF to
invest in projects such as infrastructure for senior citizens
"Our exposure to Russia is relatively small, which means the
potential is big," said Xuedong, who is particularly focused on
agriculture and energy. "We focus on the long term and on
increasing our exposure to Russia."
Xuedong said that in the coming 10 to 20 years
infrastructure will provide lucrative opportunities and said
that Russia should "renew and update" its infrastructure.
Using government money for such projects would not be
sufficient, he said, and other instruments, such as
public-private partnerships, could be used.
"Governments should sell some of the businesses ... to
private investments and the money received for the sale of such
businesses could be rechanneled into projects," Xuedong said.
"If we take this approach, we could speed up the infrastructure
Still, some were sceptical that Asian investors would commit
heavily given Russia's slowing growth and the risk of recession.
"I suspect most Asian and Middle East investors are going to
look at this picture and see the same things that everyone else
does - that you had growth slowing before the annexation of
Crimea and the conflict with the West," said Bernard Sucher,
board member of Russian investment group Aton.
(Reporting by Megan Davies, additional reporting by Alexei
Anishchuk; Editing by David Goodman and Sophie Walker)