Page 19 - bne IntelliNews newspaper 14 July 2017

Eastern Europe
July 14, 2017 www.intellinews.com I Page 19
Russia China Investment Fund takes aim at Russia’s best equity stories
Ben Aris in Berlin
Russia is hungry for investment but, because of its ugly stand-off with the West, few investors have much appetite for Russian stocks – even if they are unusually cheap and dynamic at the moment.
But not so the Chinese, who are taking a longer view. China’s sovereign wealth fund has partnered with Russia’s, and since the start of this year they have been actively investing into the shares of some of Russia’s most interesting companies.
The Russian Direct Investment Fund (RDIF) was originally conceived as a way to coax Western in- vestors into the country. The RDIF provided exper- tise, contacts and a measure of protection against political risk and aggressive oligarchs.
“The idea is eventually we will invest $1 out of every $10,” RDIF CEO Kirill Dmitriev explained to bne IntelliNews in 2011 when the fund was established.
But the fund has now dropped its Wall Street investment bank partners and has turned instead to Arab and Chinese sovereign wealth funds, which are slower to move, but invest big bucks once they do.
The RDIF and the China Investment Corporation (CIC), the Chinese sovereign wealth fund, cre- ated the Russia China Investment Fund (RCIF)
in June 2012 with $2bn of capital as a general investment vehicle to support their cooperation and make some money in the process. It aims to make 70% of its investments in the CIS countries and 30% in China.
President Vladimir Putin and President Xi Jinping.
Today the RDIF still has its initial $10bn of Rus- sian capital, but has commitments for another $30bn from its partners – mostly sovereign wealth funds, including China, Qatar and France – and has achieved its target of contributing $1 out of every $10 in their co-investment deals.
Early projects included a bridge over the Amur river in Russia’s far east to physically link Russia and China, the purchase of a 42% stake in RFP Group (Russian forest products group), also in the far east, and an investment into the White City exclusive office complex at the top of Tverskaya, Moscow’s main thoroughfare.
RCIF’s activity than petered out in 2014 and 2015 as trade between the two countries plummeted during Russia’s economic downturn. There was some talk about investing into high-tech industrial parks and setting up a $2bn agricultural fund
but the real action only restarted this year, after Russia emerged from its recession.
In February the RDIF formed a consortium of investors to participate in the SPO of equity market darling, the fertilizer producer PhosAgro. Together with the RCIF and leading funds from the Middle East, the consortium bought 3% from the 4.5% on offer, worth $200mn.
In the same month the RDIF cashed out some of its profits from an investment into Russia’s pre- mier children’s store Detsky Mir during its IPO. RCIF held a 23.1% stake in Detsky Mir but sold up to 10% during the IPO for an estimated $35mn in