Russia’s Elbrus passes halfway mark for third flagship

Elbrus Capital, a Russia- and Commonwealth of Independent States-focused private equity firm, has passed the halfway point for its third flagship fund, Private Equity International has learned.

The Moscow-headquartered firm held a third close on $316 million in August, according to an email to Elbrus investors seen by PEI. Elbrus Capital Fund III, which was first reported by PEI in 2019 and which held a first close in December, has a $600 million target.

Investors include US and European funds of funds, as well as family offices, the email noted. They join two large Middle Eastern investors and several European development finance institutions who committed at first close.

The vehicle has so far deployed more than $100 million across several deals, including real estate classifieds group CIAN and financial comparison site Banki.ru, per the email. Fund III was valued at a 1.75x gross multiple of invested capital as of the second quarter. Its 2014-vintage predecessor, the $550 million Elbrus Capital Fund II, had generated a 4.1x gross MOIC and 21 percent net internal rate of return.

Elbrus declined to comment.

That Elbrus has reached this fundraising milestone is impressive. Russian private equity is still reeling from the outcome of case that has haunted the market for more than two years, with a Moscow court last month finding Baring Vostok Capital Partners founder Michael Calvey and his colleague Philippe Delpal guilty of embezzlement in a decision some believe to be politically motivated.

Elbrus Capital Fund III is one of only five Russia-focused funds in market, and the largest, according to PEI data.

Russia’s private equity market was already on the backfoot before the Calvey incident. Local firms collected just $2.85 billion between 2016 and 2018; compared with $10.25 billion in the previous three years, according to PEI data.

Recent investment activity has been led in no small part by domestic, Middle Eastern and Asian government entities. State-backed institutions such as the $10 billion Russian Direct Investment Fund were responsible for 73 percent of investments in H1 2019 and 78 percent in 2018. The proportion of capital invested by vehicles with government ties only fell below 65 percent once between 2015 and 2019.

China Investment Corporation, Mubadala and Abu Dhabi Investment Authority – all sovereigns – have also been among the most active in Russia over recent years.