Russia's planned $10 billion private equity fund will be mostly funded by foreign capital, lured by targeted returns of up to 20 percent from investing in industries such as technology and pharmaceuticals, a senior official said at the weekend.
Energy-rich Russia hopes the fund will help diversify its $1.3 trillion economy away from the hydrocarbon sector, which contributes more than a fifth of the country's gross domestic product.
Russia hopes the fund will also improve foreign capital inflows, held back by a poor view of the country among some investors. It aims to attract cash-rich sovereign wealth funds and international private equity funds. Foreign investors are expected to contribute the lion's share of the capital into the fund, which will seek to make investments of between $100 million and $150 million, said Vladimir Dmitriev, head of Vnesheconombank (VEB), the state-run bank put in charge of establishing the fund.
"For each rouble put into the fund, co-investors will put in five roubles," Dmitriev told journalists in Washington at the International Monetary Fund and World Bank spring meetings. In recent weeks, Russian government officials have been conducting an unofficial roadshow for the fund, to be called The Direct Investment Fund, in Europe and the United States.
The fund will be launched in June, with Russia committing $2 billion every year over the next five years, Dmitriev said. It hopes to attract some $60 billion. The return on investment should be on a par with the 20 percent that private equity firms typically seek, according to Dmitriev's predictions.
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