Russian state fund shrugs off renouncement with new deal

The Russian Direct Investment Fund has made its first investment since a number of leading industry names abandoned its advisory board as tensions in Ukraine mount. 

Investing pari passu with China, the Kremlin-backed fund has agreed in principle to back Detsky mir, Russia’s biggest operator of department stores aimed at children. 

The company is currently wholly owned by Russian holding company Sistema JSFC.

If it goes ahead, the deal will be made from The Russia-China Investment Fund, a collaborative vehicle between the Russian and Chinese states that aims to make cross-border deals and bolster the countries’ economic ties. 

New capital will be invested in opening new department stores and building logistics centres. Detsky mir currently operates 265 shops in 98 Russian and four Kazakhstani cities. 

Last month Permira co-managing partner Kurt Bjorklund and Harvard academic Josh Lerner left their positions as members of the international advisory board at the RDIF.

In July the RDIF stated that Western sanctions would only affect certain companies and subsidiaries which are financed by European or US entities. Its investment activity would not be affected because it deploys capital only with co-investors, it claimed.

Around 90 per cent of the RDIF’s money is thought to come from the Middle East and China, though it also has agreements with Italian and French state-backed investment funds.

Notable names that were listed on the fund’s website included Leon Black of Apollo, Blackstone’s Stephen Schwarzman, Warburg Pincus’ head of European operations, Joseph Schull, and Apax Partners chairman Martin Halusa. The RDIF recently removed all details of the composition of the board, although it is thought that these US private equity figureheads remain on the board. 

Dominique Strauss-Kahn, the disgraced former head of the IMF, remains on RDIF’s supervisory board with Laurent Vigier of CDC International Capital and Vladimir Putin’s chief of staff Sergei Ivanov, who was one of the first individuals to be subjected to US sanctions.

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