Preqin’s Fund Manager Profiles online service tracks 116 private equity firms currently headquartered in Russia, with over 90% of these firms based in the capital city, Moscow. Private equity firms have a tendency to cluster together in the main financial districts, taking advantage of the existing infrastructure in these cities. This blog will take a look at private equity firms based in Russia and their primary investment strategies.
In terms of strategy, the majority of Russia-based firms focus on venture capital investments. The chart below shows that 61% of Russia-based private equity firms primarily target venture capital investments, a significant difference from the proportion of firms that primarily target buyout (13%) and growth (12%) investments. Although venture capital-focused firms are the most numerous, unsurprisingly it is the buyout-focused firms who have raised the most capital over the last 10 years. During that period, buyout firms have raised a total of €7.9bn in committed capital in comparison to the €1.9bn raised by venture capital-focused firms.
Over the last 10 years, Russia-based private equity firms have raised €13bn in committed capital with an estimated €6.3bn available in dry powder. The largest Russia-based private equity firms in terms of total capital raised in the past 10 years are Russian Direct Investment Fund, Baring Vostok Capital Partners and Russia Partners. Between the three firms, €6.6bn has been raised – just over 50% of the total capital raised by Russia-based firms during the period.
Russian Direct Investment Fund was established by the Russian Government in 2011 to invest capital in mid-market companies to stimulate the growth of foreign direct investment in the Russian economy. In all of its investments, the fund is mandated to co-invest alongside large investors globally, looking to entice direct investment in Russia.
With the ongoing political crisis in Ukraine, the Central and Eastern Europe (CEE) region as a whole has been rocked in terms of private equity confidence, with some high profile GPs and LPs publically looking to avoid investing in the region. Until this crisis is fully resolved, with complete stability returning to the economy, the private equity industry could struggle to attract significant levels of investment.