East Capital creates Russian banking PE fund

East Capital has initiated efforts to raise €300 million to €350 million for a new fund targeting Russia’s banking sector, where regulatory reforms and consumer spending are expected to propel growth.

Stockholm-based East Capital has announced its intention to raise €300 million ($350 million) to €350 million for a private equity fund to invest in the banking sector of Russia and the CIS. The new fund will be East Capital’s second private equity fund, and it will focus on acquiring minority stakes in established financial institutions with growth potential.

The new vehicle, to be called East Capital Explorer Financial Institutions Fund, will be used to make 15 to 20 investments, according to Kestutis Sasnauskas, a founding partner of East Capital and managing director of the firm’s private equity department.

“There is very strong growth in terms of loan portfolios and assets overall in Russia and all over the CIS region, so there is huge potential in the banking system,” says Sasnauskas. At the same time, the region’s banking and finance industry is “very undeveloped and on the face of very strong growth,” particularly in light of ongoing political and regulatory reforms and strong consumer spending, says Sasnauskas.

Currently, East Capital has one investment professional based at the firm’s Moscow office. However, upon further development of the fund, Sasnauskas and others will relocate to East Capital’s Moscow office, where a team of five investment professionals will manage the new fund.

Founded in 1997, East Capital is an Eastern European financial markets-focused independent asset manager with €1.8 billion under management. The fully invested SEK85 million ($10.34, €8.83) East Capital Amber Fund was the firm’s first private equity fund, targeting SMEs in the consumer goods and services industry of the Baltic States, Eastern Europe, and northwest Russia.