The Russian Direct Investment Fund, the sovereign wealth fund
established in 2011 to make equity investments in the Russian
Federation, announced this week that it had teamed up with Abu-Dhabi’s
department of finance to create a joint venture to invest in Russian
infrastructure.
The $5 billion contribution from the Abu Dhabi department of finance is the largest investment from the Middle East ever made into Russia, according to Kirill Dmitriev, chief executive of the RDIF, who spoke to Private Equity News, sister publication of Financial News, about the joint venture.
Private Equity News: What was the thinking behind this joint venture?
Kirill Dmitriev: The RDIF is well-placed to build long term partnerships with sovereign wealth funds, and we have already partnered with China, Japan, Kuwait and two months ago we agreed a $2 billion co-investment fund with Mubadala [Development Company, a subsidiary of the Abu Dhabi government]. More and more sovereign wealth funds will be working together to make investments directly. Governments see chances for returns from infrastructure investments.
PEN: Do you still see a significant place for traditional private equity and infrastructure firms in your strategy?
KD: This is one of the largest investments into infrastructure funds in the world. We still see a significant need to invest with infrastructure funds, and we work with a number of specialists, for example Macquarie [which RDIF teamed up with to bid for participation in the construction of a section of the M11 toll road between Moscow and St. Petersburg]. Through this joint venture we will be able to co-invest with specialist funds.
PEN: What sorts of investments will you be making through this joint venture?
KD: Traditionally there was more investment in brownfield sites but governments are seeing attractive returns from greenfield investment. We will mostly be investing in greenfield assets in Russia. For example, we are investing in a toll road where 70% of the capital will be provided by the Russian government budget and the remaining 30% by us, and we get attractive returns for us. We have a pipeline of projects that we have developed over the past year including roads and airports. The Russian government will provide some funding from the budget. Our first investment will be in the next year and we will bring in infrastructure investors from all over the world to do similar deals.
PEN: Will RDIF be teaming up with other sovereign wealth funds for similar projects?
KD: Other sovereign wealth funds may be interested to get exposure to Russian infrastructure. Russia has a very attractive model. We are having ongoing discussions with several other big players.
Private Equity News: What was the thinking behind this joint venture?
Kirill Dmitriev: The RDIF is well-placed to build long term partnerships with sovereign wealth funds, and we have already partnered with China, Japan, Kuwait and two months ago we agreed a $2 billion co-investment fund with Mubadala [Development Company, a subsidiary of the Abu Dhabi government]. More and more sovereign wealth funds will be working together to make investments directly. Governments see chances for returns from infrastructure investments.
PEN: Do you still see a significant place for traditional private equity and infrastructure firms in your strategy?
KD: This is one of the largest investments into infrastructure funds in the world. We still see a significant need to invest with infrastructure funds, and we work with a number of specialists, for example Macquarie [which RDIF teamed up with to bid for participation in the construction of a section of the M11 toll road between Moscow and St. Petersburg]. Through this joint venture we will be able to co-invest with specialist funds.
PEN: What sorts of investments will you be making through this joint venture?
KD: Traditionally there was more investment in brownfield sites but governments are seeing attractive returns from greenfield investment. We will mostly be investing in greenfield assets in Russia. For example, we are investing in a toll road where 70% of the capital will be provided by the Russian government budget and the remaining 30% by us, and we get attractive returns for us. We have a pipeline of projects that we have developed over the past year including roads and airports. The Russian government will provide some funding from the budget. Our first investment will be in the next year and we will bring in infrastructure investors from all over the world to do similar deals.
PEN: Will RDIF be teaming up with other sovereign wealth funds for similar projects?
KD: Other sovereign wealth funds may be interested to get exposure to Russian infrastructure. Russia has a very attractive model. We are having ongoing discussions with several other big players.
