Page 128 - IFR Opportunities in Russian capital markets

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ifrintelligence reports/Opportunities in: Russian Capital Markets
Alfa Capital Partners
A franchise set up in partnership between the fund's managers – Richard Sobel is a doyen of Russian capital markets – and the main shareholders in the Alfa Group, Alfa Capital Partners is a hybrid of an oligarch fund and a purely commercial private equity fund. The fund has had some notable success in new economy sectors and is responsible, among other things, for launching the Russian language MTV.
East Capital
The Stockholm based East Capital is now one of the largest of the Eastern Europe funds, with about US$3bn under management as of the start of 2007. The company was originally launched aimed at Scandinavian retail investors in 1997 as a specialist fund targeting Central, Eastern and Southeast Europe, but has grown and expanded massively since then. It provides a range of mutual fund products that target its various markets. In 2004, it launched the first of the Bering fund series that make private equity investments into Russia, Ukraine and more recently the Caspian region. And in November 2006, East Capital launched the East Capital Explorer Financial Institutions Fund. While the minimum requirements for the Bering fund is of the order of US$50,000 to US$75,000 and so still accessible to well-off retail investments, the Explorer fund had a threshold of US$1m and was the first fund aimed specifically at institutional investors. The fund buys minority stakes in up-and-coming banks across the region, but mostly in Russia, and has been a huge success as it launched about six months before the fever for Russian banking assets had broken out.
Firebird management
The New York-based Firebird manages four Former Soviet Union equity funds: Firebird Fund LP, Firebird New Russia Fund LLC, Firebird Republics Fund LLC, and Firebird Avrora Fund LLC. The Firebird Fund and Firebird New Russia Fund have returned 60.8% and 50.4% respectively over the last year and are 90% invested in Russian equities. The biggest funds are the Firebird Republics Fund and Firebird Avrora Fund (which is only one of the four funds still open to new investors as of the start of 2007), with over US$650m under management in each. Like most investments in Russia, these two funds are hunting for opportunities in the regions and returned 69.1% and 50.5% over 2006. The Firebird funds had a total of US$2.8bn under management as of the end of 2006. About US$1.9bn of this is in these four funds, but Firebird also has two global funds – Firebird Global Fund I and II. The fund does not have a clearly defined strategy but rather invests into both listed companies or buys private equity stakes – the bottom line is its managers are constantly travelling in the region looking for opportunities wherever they may be.
Baring Vostok Capital Partners
BVCP was founded in 1994 and is one of the pioneers of Russia's private equity market. BVCP set up one of the very first funds buying into Russian companies when it was still not clear if Russia was going to stick to the road of democracy and market economics. BVCP has stakes in about 25 companies from across the industrial spectrum, including independent oil producers, retailers, financial services and media. It has raised and invested some US$800m, and was in the process of closing a fourth fund in the first quarter of 2007. Since inception, the fund has distributed over US$1.1bn to investors from 28 realised investments with an average multiple of invested capital of 4.5 times and 40% IRR (internal rate of return). BVCP funds owned 17 businesses at the start of 2007 with US$815m in revenues, US$237m in net income and 8,264 employees. Revenue growth in 2006 was 71% over 2005.
Prosperity Capital Management
Another pioneer among the Russia-specific funds, Prosperity launched a private equity fund called Vosktok (Sunrise) in October 2006 to invest into companies and sectors currently restructuring and investing for growth – sectors other than raw materials. The new fund is focused on the internal value created by the ongoing restructuring rather than the external valuation creation from growth. Russia has gone from having lots of macro problems to lots of micro ones – but even those are being fixed by entrepreneurs and a state that is taking responsibility, says Mattias Westmann, the fund's manager.
Mint Capital
Scandinavian private equity firm Mint Capital founded its first fund in 2001 and was fully invested in 2005. There are seven investments in the Mint I portfolio and the firm is expecting the first exits from this fund in 2007. The first fund is primarily invested in software, media and technology. A second fund was raised in 2005 and Mint II is making expansion stage investments in rapidly growing companies that are generally in the US$10–100m revenue bracket in such industries as media, consumer goods and services, financial services, and retail. The second fund has so far made two investments – a payment services company and a retail operator.
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