Russia appoints PE heavyweights to $10bn fund board

The Russian Direct Investment Fund, a $10 billion vehicle backed by the Russian government, has appointed some of private equity’s biggest names to its international board of advisors, including Steve Schwarzman, Leon Black and David Bonderman. 

The board includes representatives from Apollo Global Management, TPG Capital, Permira, TPG Capital, Apax Partners, Warburg Pincus and The Blackstone Group. Sovereign wealth funds Kuwait Investment Authority, Korea Investment Corporation and the China Investment Corporation also hold seats on the board. 

RDIF could not be reached for comment.

The fund is fully staffed and prepared to begin its investment period, a source close to RDIF told Private Equity International. RDIF will be funded with $2 billion from the Russian government over the next five years, which will constitute the entirety of its capital, the source said. RDIF is mandated to match each of its investments with that of an international co-investor, primarily targeting equity investments in Russian businesses.

The additions of several private equity heavyweights could indicate who the fund partners with on its co-investments going forward. Russia is an untapped market for many of the firms now associated with the fund.

“It’s always good to have friends when you are going to a place that you are not as familiar with,” Schwarzman said in a statement about his appointment to the board.

RDIF expects to close on its first investments by the end of 2011 or the first quarter of 2012, the source said. Speaking at the Sochi International Investment forum Friday, fund CEO Kirill Dmitriev said that RDIF has already begun evaluating a pipeline of 20 potential transactions.

Dmitriev, a former Goldman Sachs investment banker and president of buyout firm Icon Private Equity, was hired as RDIF’s chief executive officer in May. The fund held a formal launch in June in St. Petersburg, and is designed to act as a “catalyst for direct investment in the Russian economy”.

To date, Russia has been the only BRIC country that has failed to capitalise on strong macroeconomic growth indicators, with many investors sceptical of the country’s political stability amid widespread reports of corruption. 

Russian Prime Minister Vladimir Putin has campaigned heavily for the fund; he oversaw its development as head of the supervisory board at state development bank Vnesheconombank. He announced Dmitriev’s appointment in front of many of the firms that now hold seats on RDIF’s board.

“The Russian government and our development institutions, including the newly established Direct Investment Fund, are willing to establish constructive relations with investors,” Putin said.

In August, TPG invested $1.1 billion in Russian retailer Lenta alongside Russian-state backed VTB Capital and the European Bank for Reconstruction and Development. It was Russia’s largest private equity deal over the past three years, exceeding the total amount of investment in the country in all of 2010.

At the ready

Yesterday, the fund announced that it had loaded its investment staff with veterans of the private equity industry in the country, including executives from Delta Private Equity and Darby Private Equity.

Alexei Chekunkov, Sean Glodek, Alec Maryanchik, Richard Ogdon and Tagir Sitdekov will join the fund as directors. Freshfields Bruckhaus Deringer partner Mikhail Irzhevsky will act as chief legal counsel and Walid Kamhawi, a partner at HK Advisory Services Limited, was hired as an advisor.

Chekunkov and Glodek join RDIF after having previously worked for Delta Private Equity and Darby Private Equity, respectively, where both focused on Russian investments. Maryanchik was chief executive officer and co-founder of Russian-based private equity firm Klever Asset Management. Before joining RDIF, Ogdon was chief risk and capital officer for Russian investment bank Troika Dialog. Sitdekov was previously managing director at A-1, the direct investment wing of Alfa Group.