To Russia With Love: More PE Targets Russia –

Whether coming from the East or the West, whether investing in venture or buyouts, more private equity investors want to invest in Russia. Last week two more private equity groups announced plans to invest more than $500 million in private equity in Russia and the Commonwealth of Independent States (CIS) of the former Soviet Union.

Last week Stockholm, Sweden-based East Capital Private Equity announced it launched the East Capital Explorer Financial Institutions Fund. The fund, which has a target of between $350 million and $410 million, will invest in banking and financial services in Russia and the CIS.

According to the firm’s outlook, a growing economy coupled with banking reforms has made the banking and financial services sector an industry of great growth in the former Soviet bloc. “It’s one of the most attractive sectors to invest,” says Kestutis Sasnauskas, a founding partner of East Capital. Sasnauskas, who will manage the fund’s investment activities, says that his firm’s investment in the Russian banking industry will help further the adoption of Western banking practices and capitalize on an underserved market.

The firm is using the Swedish placement agent Ohman and tapping into its own network of institutional investors and high net worth individual investors to raise the fund. East Capital expects its limited partners to be mostly based in the Nordic region and Europe. It hopes to have a first close by the end of the year and a final close within six months.

Sasnauskas is based in Moscow with one other professional and will soon oversee a staff of five there. Former Central Bank of Sweden leader Bengt Dennis and Jean-Marie Laporte, former Nordic Director at Calyon, will join the firm’s board of directors with the mandate to oversee the new fund.

East Capital, an asset management firm with approximately $2 billion under management, also provides public market investment and other financial services. While it is not new to investment in Russia, this is its first private equity effort there. It has been bullish on investment in the region for quite some time, and admitted to the region’s economic volatility in a message to its investors last month. “We ask our investors to have patience with the fact that Russia is a volatile market,” the firm said in a statement to its investors. That statement said that the frustrating levels of volatility may be a necessary price to pay for “remarkable historic growth” of its Russian strategy.

On the same day that East Capital announced its mid-cap private equity fund, Singapore-based investment company Temasek Holdings announced it was teaming with Russian investment bank Troika Dialog to co-sponsor a new private equity fund. The fund, named the Russia New Growth Fund, will begin investing with $150 million in private equity commitments. The groups will seek new investors in hopes of having a final close on the fund next year.

The fund’s Moscow-based management team will invest between $5 million and $45 million in minority and majority equity investments in business services, consumer goods, media, specialized manufacturing, retail and telecommunications companies.

Former Centurion Capital CEO and Finartis Private Equity Managing Director Richard Waryn will be in charge of the fund. Temasek Holdings was founded in 1974 and manages approximately $63 billion. Moscow-based Troika Dialog Asset Management was founded in 1996 and manages $1.5 billion.

This past year has seen a flurry of private equity firms launch and develop funds aimed at the former Soviet Union. Menlo Park, Calif.-based venture firm Draper Fisher Jurvetson has partnered with Kiev-based TechInvest to raise up to $80 million for a new fund aimed at Ukrainian and Russian startups. Moscow-based Baring Vostok Capital Partners, an affiliate of London’s Baring Private Equity Partners, closed its third fund with $400 million earlier this year.