Is Russia-Focused Fundraising Out of Favour when Compared to Other BRIC Countries?

by Laura Duce

  • 24 Sep 2013
  • PE

Preqin’s Funds in Market demonstrates that although BRIC-focused fundraising is still active, there is actually a stronger preference for investments in China, India and Brazil, as opposed to those in Russia. One contributing factor towards private equity investment interest within a particular country is its perceived levels of corruption. Concerns over the local difficulties in Russia which have influence on the ease of access for foreign investors in particular, may be a key factor when considering Russian private equity investments.

There are currently 223 funds on the road with an exclusive focus on the BRIC region, collectively targeting over $60bn in investor commitments. The majority of these funds focus solely on Chinese investments, with 95 funds aiming to garner more than $30bn in capital commitments focused within the country. The second most common country focus within the BRIC region is India, with 88 funds targeting roughly $17bn in investor capital. This is followed by Brazil-focused funds, with more than $8bn being targeted collectively by 28 funds. Lagging much further behind is Russia-focused fundraising, with just 11 funds, or less than 5% of all BRIC-focused funds targeting the country, targeting less than $4bn in aggregate investor commitments. Only one BRIC-focused fund currently in market targets investments across the whole BRIC region: Siguler Guff BRIC Opportunities Fund III, a fund of funds vehicle being raised by Siguler Guff, with a $500mn target and a diversified industry sector focus.

Unsurprisingly, data for funds closed with a focus on the BRIC region also illustrate a much lesser interest in Russian investments, with only one Russia-focused fund having closed in 2013 so far. This is the Phenomen Ventures Fund, a $300mn venture capital fund with a focus on technology-related industry sectors. China-based historical fundraising, similar to the trend shown in the funds on the road data, has dominated the regional fundraising activity so far this year, with 29 of the 41 funds closed with a BRIC region focus being raised solely for Chinese investments. These funds alone have collectively raised a total of more than $9bn, or 82% of the total capital raised for the BRIC region so far this year.

This time last year, there were eight funds in market with a focus on Russia, compared to 11 funds on the road as of September 2013 with a Russian focus. However, the capital being targeted by these funds has dropped, from a collective target of $4.1bn in September 2012, to the $3.7bn currently being targeted. All but one of the funds currently in market is being raised by Russia-based fund managers, perhaps indicating a disregard for foreign investments within the country. Just one of the top 10 largest BRIC-focused funds in market is focused on Russian investments, AVG CIS Agricultural Opportunities Fund. The vehicle has a target of $1.5bn, and a specific focus on Russian agriculture.

Preqin’s Funds in Market data shows that although there is still an obvious interest in BRIC private equity fundraising, with a largely significant amount of capital being targeted for investments within the region, it is in fact Brazil, India and China that are largely preferred by fund managers.

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