Aurora targets second Russia fund

The manager of London’s only listed Russia-focused private equity fund is planning to raise a £50m unlisted fund – Aurora II – to take advantage of attractive prices among small- and medium-sized Russian businesses.

Aurora Investment Advisors, the firm behind the London-listed private equity vehicle Aurora Russia, is set to raise a second fund as it seeks to take advantage of depressed valuations in the Russian market.

The firm will try to raise its first unlisted fund, the £50 million (€56 million; $76 million) Aurora II, from European institutions and high net worth individuals. The fund will follow its listed predecessor’s strategy of investing in small- to mid-sized Russian companies with significant growth potential.

Russia: stabilised

Aurora raised its first fund via a £75 million initial public offering on London’s junior stock exchange AiM in 2006. The fund is now fully invested in five investments across the business services, retail financial services and consumer sectors.

As is the case in many economies around the world, there are many healthy companies in Russia with limited options when it comes to raising money, which means valuations are looking attractive, said John McRoberts, a London-based director of Aurora Russia, in an interview.

In its monthly update on the Russian private equity market, Aurora said the country’s economic situation was showing signs of stabilising with “medium term drivers of the economy” intact.

As the original AiM-listed vehicle generates cash though realisations, it will be able to co-invest alongside the new fund.

“Our goal is to build a quality private equity business with a number of funds over a number of years,” said McRoberts.

As of Aurora Russia’s most recent valuation figures at the end of September 2008, the listed vehicle was worth £87.64 million, or 116.9 per share. The share price – at around 25 pence at press time – continues to trade at a significant discount to net asset value.