In a move underlining confidence in the revival of the Russian economy, the European Bank for Reconstruction and Development is investing up to $50 million in a private equity fund targeted at the Russian market launched by UFG Asset Management (UFG).
UFG Private Equity Fund II will focus on acquiring equity stakes in high-quality middle market companies in Russia and the Commonwealth of Independent States (CIS), particularly those which require a restructuring of their capital base or which plan to pursue consolidations opportunities.
The fund, whose target is to raise $200 million, has just had its first closing at $150 million and is aiming for the second and final closing towards the end of the year
The EBRD has in all committed over $900 million to Russia-focused private equity funds since the Bank made its first such investment in 1993, said the Bank’s Business Group Director for Financial Institutions, Nick Tesseyman.
This investment in a well-run fund with a sound strategy is part of the Bank’s anti-crisis response aimed at ensuring the availability of funding to business in the EBRD’s countries of operation despite the drastic reduction of capital available to the market in the current financial turmoil, Mr. Tesseyman added.
Equity investments are a key part of the EBRD’s strategy and account for nearly a third of the Bank’s €6.6 billion ($9.2 billion) Russian portfolio. Equity’s share of overall EBRD investments in Russia peaked at 51 percent in 1999, the year following the Russian financial crisis.
The EBRD, owned by 61 countries and two intergovernmental institutions, is supporting the development of market economies and democracies in countries from central Europe to central Asia.
UFG Private Equity is the private equity arm of UFG Asset Management, which was founded in Russia in1996. UFG Asset Management was originally part of United Financial Group, which sold its investment banking business to Deutsche Bank AG in 2005. UFG Asset Management remains under the control of the group’s founders and is a leading alternative asset manager in Russia with nearly $1.2 billion of assets under management as of May 31, 2009.