The Russian Direct Investment Fund, Russia’s state-backed co-investment vehicle, and China Investment Corp, plan to raise another $2 billion next year for their joint Russia-China Investment Fund (RCIF), said Sean Glodek, RDIF’s director.
The joint fund has been investing an initial $2 billion, which was contributed equally by both sides when the partnership was established in early 2012.
“We’ll fundraise next year to top it up to $4 billion,” Glodek told Private Equity International. “We’ll generate more transactions to show people the concept.”
The RCIF does direct or co-investments that have an angle on developing trade between Russia and China.
In the latest deal in October, the fund took a 42 percent stake in Russian Forest Products Group, which exports 90 percent of its output to China.
“Our value add comes from operational improvements and the ability to bring the relevant ministry officials to the table to work on regulations that impact on investments,“ Glodek said. “Companies in Russia tend to make good margins, so it’s less about them needing cash and more about `what can you do for me?’”
Roughly 15 percent of the $2 billion has been invested and he expects more transactions in Russia in the coming months.
RCIF is looking at investments in mines and mine deposits to be developed “with blue chip international partners”, as well as the expansion of rail connections between Russia and China and financial service companies that serve communities along the border.
The joint fund with CIC is a separate vehicle with separate teams from RDIF’s other partnerships, he said.
The Russian SWF has been busy signing other joint agreements in Asia.
In November, RDIF set up a $500 million joint investment platform with Korea Investment Corp to focus on cross-border investments “which fulfill Russian-Korean strategic interests” and in April created a $1 billion Russian-Japanese investment platform with Japan Bank.
Last year, RDIF and State Bank of India signed an agreement to invest up to $1 billion each in projects and companies with a Russia-India angle.
The firm is also talking to Malaysia’s Khazanah Nasional and Australian funds, Glodek added.
RFID has also started investing in real estate and is expected to close its first deal in January, he said.
In total, RDIF has $20 billion in commitments, with equal parts from the Russian government and foreign investors, Glodek said. Of that, $3.5 billion is deployed, of which $850 million is RDIF capital and the rest from co-investors.