Warburg Pincus to invest in Russia

The US private equity firm has revealed plans to begin investing in Russia to take advantage of the country’s rapidly expanding economy.

Warburg Pincus, the global private equity firm headquartered in New York, has revealed plans to make investments in Russia for the first time, the result of the country’s current status as the fastest growing economy of the Group of Eight industrialised nations.

In an interview with Bloomberg, London-based partner Joseph Schull said the firm would look to invest in businesses in sectors ranging from retail to financial services, investing between $20m and $50m per company.


The Russian government is predicting that the economy will grow by 5.2 per cent this year, considerably higher than the average growth expected among Western countries. Data published by Bloomberg indicates that $19.2bn of M&A activity has been completed in Russia this year, four times the total reported in 2002.


“The profits generated through Russia's natural resources are starting to be reinvested in the economy,” Schull told Bloomberg. “We feel comfortable with our ability to understand and deal with emerging markets risk in a way that many are not.”


Warburg Pincus is among the most prominent investors in emerging markets with established offices in Mumbai, Beijing, Singapore and Seoul, in addition to its presence in Europe and the US. The firm is currently investing from its $5.3bn Warburg Pincus VIII global private equity fund, which closed in April 2002.


The Russian market has been the subject of heightened interest in recent times, in part the result of a boom in the country’s oil production. AIG and Interros, one of Russia’s largest investment holding companies, announced a joint venture in July which will see the two firms each provide a minimum of $50m to cornerstone the launch of a $300m private equity fund dedicated to countries of the former Soviet Union.


Delta Capital, the Russian private equity firm which manages the US government-backed US Russia Investment Fund, is thought to be close to announcing the final close of its first private equity fund targeting private investors. The Delta Russia Fund LP is looking to raise around $100m.


Despite the growing interest, Schull believes that investors in Russia may still face difficulties in the coming years. “This is still an emerging market,” Schull told Bloomberg, adding that the firm has no immediate plans to open an office in Russia. “It would be naive to assume that Russia will not experience economic and political volatility in future.”