Russia in $10bn move to tempt investors
By Henny Sender in Paris and Catherine Belton in Moscow
Published: March 6 2011 22:35 | Last updated: March 6 2011 22:35

The Russian government is setting up a $10bn fund to co-invest with leading international private equity firms in an effort to attract foreign capital to the country, and has asked Goldman Sachs informally to guide the project, according to people familiar with the matter.

Separately, Russia is also creating a committee to advise Dmitry Medvedev, Russian president, on transforming Moscow into an international financial centre. Members will include Goldman’s chief executive Lloyd Blankfein, Blackstone’s founder Steve Schwarzman, Jamie Dimon of JPMorgan Chase and Brian Moynihan of Bank of America, as well as representatives from BNP Paribas and UniCredit among others.

The $10bn fund initiative comes directly from Mr Medvedev, these people add. The firms that have been approached include Apollo Management, Blackstone and Carlyle among others, and each is considering its response.

The Russians have also reached out to Middle East sovereign wealth funds. So far, most private equity firms have regarded Russia with extreme caution.

Carlyle established investment teams there twice in the last decade and then disbanded them. At a Berlin conference on March 1, co-founder David Rubenstein said the returns to be made in Russia were not commensurate with the risks. “It is relatively less attractive than the other Bric countries,” he said.

While there is no deadline, government officials are expected to meet Vladimir Putin, prime minister, at the end of this month to launch the initiative, with the capital likely to be committed over time.

A spokesman for Russia’s first deputy prime minister Igor Shuvalov confirmed that discussions on creating such a fund were under way with officials. But he declined to comment on any of the details. Goldman also declined to comment.

The Russian effort comes as scepticism about the rule of law, business practices and corruption remains widespread among western investors.

Russian officials plan to sell government assets at what they say will be attractive prices..