Page 10 - bne magazine September 2021_20210901

10 I Companies & Markets bne September 2021
bne:Funds
Da Vinci fund III aims to deRussify its portfolio companies and make them more valuable
Ben Aris in Berlin
Da Vinci Capital, one of Russia’s biggest private equity investors, has been helping its portfolio companies
to build up a more international business that will increase their valuation. Now it has launched a new fund that invests into companies from the whole Emerging Europe region, but explicitly avoids Russian companies.
At the same time part of its investment strategy is to take western companies and bring them into the region to take advantage of the deep pool of highly talented labour available that work at much lower cost.
Da Vinci is a veteran of the Eastern Europe investment business. It played a key role in the capital market reforms in Russia in 2012 that hooked it up to the international settlement system and gave investors around the world direct access to stocks and bonds, making its investors
a bundle in the process.
Now ithas just had a first closing on it Da Vinci Capital III fund (DVCIII), raising $90mn, and hopes to increase that to $300mn over subsequent rounds.
With economies around the world bouncing back, western equity markets overbought but emerging equity markets starting to recover, the interest amongst investors is palpable.
The German development bank DEG (Deutsche Investitions- und Entwicklungsgesellschaft) is the anchor investors
with $35mn, but it has been joined by the Kazakhstan’s Kazyna Capital Management (KCM), a fund of private equity funds to promote the development of the republic,
as well as Samrik-Kazyna, the country’s sovereign wealth fund, as the core investors in DVCIII’s first round. In addition there are a number of private investors and funds and more are expected to come in in the subsequent funding rounds.
“There are another 22 private investors that have joined and
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other development financial institutions,” says Dennis Fuller the fund’s managing director in an exclusive interview with bne IntelliNews.
Russia excluded
The DVCIII fund is targeting growing companies across Emerging Europe but it specifically excludes Russia.
“It’s mainly the result of the mandates of some of our development financial institutions investors. For example the International Financial Corporation (IFC) is one of the investors and it is not allowed to invest into Russia,” says Fuller. “But that is not a problem as there are plenty of great prospects from across the region. We have plenty to do.”
“We are the only independent stakeholder and we helped to de-Russify it. When we bought in about 80% of its business was Russian, but now its has fallen to around 60%”
Having development banks in the fund is a boon as it gives them some measure of political cover and better access to the government. It also encourages the limited partners (LPs) to invest as risks are reduced.
“DEG was already a co-investor in our second fund in Ukraine, but not an LP,” says Fuller. “This time it has come in as an anchor investor.”
The exclusion of Russia is specific to the third fund, but it was already a theme in the second Da Vinci Fund. Four years ago it