Despite the growing political tensions over Ukraine and the slowdown in Russia's domestic economy, the long term investment case is stronger in Russia than ever before, according to Sean Glodek, director of the Russian Direct Investment Fund.
The fund, which is mandated to make every deal with a foreign co-investor, is adding infrastructure and real estate investments to its portfolio, which has historically been focused on private equity investments.
“Our deal flow is better than it ever has been and we are getting better pricing now thanks to event domestic legal reforms,” Glodek told Private Equity International. “A lot of the focus right now is on Ukraine but that is really secondary. The long term investment story in Russia is strong, and that is supported by the countries less worried about sanction risk who are deploying capital there now.”
Glodek added that technology, healthcare and the domestic consumer sector represent key private equity investment areas for RDIF.
“Our second biggest export besides energy is IT,” he said. “We have a heavily educated population in Russia and we can provide those skills. There is also a significant domestic opportunity as well to serve the Russian economy which is very large.”
RDIF recently announced a large scale investment plan targeting the Far East. At the end of last year the fund had invested about R$22.4 billion (€455 million; $629 million) on the first projects in the Far East. About R$16.3 billion of that money came from foreign co-investors. For 2014, RDIF is targeting even more investments, including a R$500 million joint venture with the Korean Investment Corporation (KIC). Other areas of interest include Malaysia, Australia, and the Middle East.
Other projects include the Russia-China Investment Fund (RCIF), a joint venture of RDIF and China Investment Corporation, which will invest in constructing the first bridge to connect Russia and China across the Amur River. RDIF and its international partners are also negotiating investment in the development of three of the largest mineral projects in the Russian Far East: the Udokan and Baim copper deposits, and the Natalkino gold field.
RDIF is currently at the final stage of negotiations with Rostelecom over a joint project to improve digital services and infrastructure in small and mid-sized Russian towns and villages. The project is partially financed by the Russian National Wealth Fund and will be first implemented in the Far East of Russia.