RS Main The primary goal of RDIF is to attract investors who have not been previously investing significant amounts in Russia

The primary goal of RDIF is to attract investors who have not been previously investing significant amounts in Russia

June 2011

Arkady Dvorkovich, an aid to the president, told Russian Survey about where the money for the Russian Direct Investments Fund is going to come from and the goals set for the fund by the government.

Arkady DvorkovichWhat foreign financial companies have expressed interest in the Direct Investments Fund? Do any of the high profile international financial institutions such as the World Bank, International Monetary Fund or the European Bank of Reconstruction and Development have any intention to participate in the Direct Investments Fund?

- Leading sovereign wealth funds, pension funds, and private equity firms have indicated their interest in RDIF. Most of them believe that Russia presents interesting investment opportunities but they need a good co-investment partner to share risks with and to start investing. There is also interest from EBRD and other developmental organizations and the Fund will be working on co-investments with them as well. However, the primary goal of the fund is to attract investors who have not been previously investing significant amounts in Russia.

Has the Fund been tasked with repatriating the Russian capital invested abroad?

- The Fund will be working closely with the Russian partners as the Fund will be investing in the Russian companies. For now, though, the focus has been on attracting foreign investors.

What guarantees will be available to investors in the Fund?

- The Fund will not be providing guarantees but will be focused on co-investing with other investors. Guarantees change the incentives of foreign investors as they protect their downside regardless of the performance of the company. That would mean that foreign investors may proceed with some investments that are too risky, for example, as their downside is protected. The Fund will be sharing risks with the co-investors not eliminating them. Therefore, both the Fund and its co-investor will be focused on the projects that can provide good rate of return. By demonstrating that a good rate of return can be earned in Russia, this will encourage more and more investors to invest.

Are there any top priority projects? Are there any selection criteria for which projects will be financed by the Fund?

- The Fund needs to still be registered, hire the investment team, and develop proper corporate governance procedures prior to making any investments. The Fund will be investing primarily in the growth sectors of modernization and innovation that have been outlined by President Medvedev . Among them are projects in

  • Innovative energy
  • Nuclear power
  • Aerospace industry
  • Pharmaceuticals & Healthcare
  • Telecommunications and IT

As well as

  • Advanced processing of natural resources
  • Innovative mining
  • Agriculture and food retail
  • Building and construction materials
  • Transportation & Logistics

The Fund will focus on some key investment themes that would enable to achieve good rates of return – investing in companies that grow based on the growing purchasing power of the Russian middle class, investing in infrastructure opportunities and in opportunities to substitute imported products, etc.

Andrei Susarov,
Tax columnist for the Moscow news
Exclusively for Russian Survey RS