CapMan closes Russia fund below €100m

CapMan was initially seeking €175m for its second Russia-specific vehicle

Helsinki-headquartered CapMan has closed its second Russia-focused fund on €99.1 million, after a tough 18 months of fundraising.

CapMan Russia II which, according to Private Equity International’s Research and Analytics division, had an original target of €175 million, held a first close on €97 million with ten investors in April 2013.

In a statement on Monday, Jerome Bouix, senior partner and head of business development and investor relations at CapMan, said the firm was “satisfied with the final fund size” considering the current market environment in the region.

“The Ukrainian crisis has obviously had a negative impact on fundraising and many investors have declined or stopped new investments in Russia,” Bouix said. “We are pleased that we got strong support from the majority of our previous fund’s investors and that new institutional investors from Europe have joined the fund as well. We have a good basis to continue our strategy in the market.”

CapMan said it would be investing in “fast-growing non-strategic” sectors that serve Russia’s burgeoning middle class, such as consumer goods and services, e-commerce, home improvement, business services, and private healthcare.

In an earlier summary of its investment in the fund, the International Finance Corporation confirmed the fund’s original target and said CapMan was planning to make 12 to 14 investments in small and midmarket companies with growth potential and low leverage. IFC said the average investment size was expected to be around €12 million for “minority positions with strong governance rights.”

The European Bank for Reconstruction and Development also invested in both of CapMan’s Russia vehicles, PEI reported last April.

According to the firm, the fund has already made two investments. In August 2013 CapMan used funds from Russia II to team up with the Russian Direct Investment Fund – Russia’s $10 billion investment vehicle backed by the Russian government – and the EBRD to invest in Maykor, an IT outsourcing company in Russia.

Hans Christian Dall Nygård, head of CapMan Russia, said in a statement that the firm’s portfolio in Russia has performed well, and that CapMan was benefiting from a lack of competing private equity firms.

“The post-Ukraine sanctions and rouble devaluation have had little impact on our investment strategy, with several companies actually benefiting from the lower rouble and the resulting increase in import substitution,” he said.