Virgin partners with Russians on emerging markets fund

Virgin Green Fund, backed by the Virgin Group, and Russian state-owned Rusnano Capital revealed in a statement the launch of an emerging markets-focused fund, VGF Emerging Market Growth I.

The fund, which currently has commitments of $200 million, plans to hold its first close between now and the end of the year, the firm said. It is understood to be targeting roughly $300 million.

The size of the GP commitment made by Virgin Group and Rusnano, included in the $200 million, were not disclosed. Brooks Preston, a partner with the fund, declined to discuss the fund's target or hard-cap. “We haven’t determined a specific hard-cap yet, but it’s more than $200 million,” he added.

The Emerging Market Growth I has offices in London and Moscow and is building its team in both cities, the statement said.

The vehicle will invest in buyout and growth equity opportunities in mid-cap companies with revenues between $10 and $100 million. It will make investments in companies that focus on resource efficiency, consumer sustainability and renewable energy sectors in Russia, Turkey and Central and Eastern Europe.        

The Emerging Market Fund was set up by Shai Weiss and Evan Lovell, the two co-founding partners of the Virgin Green Fund, alongside Tamas Szalai, a partner at Bancroft Private Equity, and Preston, formerly an investor with  Wolfensohn & Company.

Preston said the region has a number of interesting characteristics for the new fund.

“We are interested in Turkey because of the strength of the consumer sector, the growth overall and the energy issues that they are interested in addressing,” Preston said, adding that Central and Eastern Europe also have energy security issues, which makes it attractive for investment.

In addition, the fund will aim to take advantage of the resource efficiency opportunities in Russia, Preston said. “It is a resource rich country but that does not necessarily mean their best economic choice is to be wasteful. So the opportunity to increase the efficiency across a number of different sectors is enormous,” he added.

Partnering with the state-backed Rusnano will enable the fund to access Russian investment opportunities, Preston said. Rusnano invested in similar sectors for a number of years, and will also be an advisor to the fund, he added.

The Virgin Green Fund was founded in 2007, when it launched its Virgin Green Fund I, which raised $220 million, including a $100 million commitment from Virgin Group, against a $400 million target. The fund, which focused on cleantech and renewable energy investments in North America and Western Europe, is fully invested. It is understood the firm last year considered raising a similar Fund II, but has since decided to focus on emerging markets instead.