September 30, 2014, 00:57 / Finance

RDIF may turn into an ordinary state fund

The Russian Direct Investment Fund no longer needs foolproof protection - it will be able to attract only Russian partners as co-investors Margarita Papchenkova Margarita Lyutova Olga Kuvshinova

Russian investors are unlikely to be able to replace the whole world / Maxim Shemetov / Reuters

Largely thanks to the additional control of foreign partners, the RDIF received the right to co-financing from the National Welfare Fund (NWF) under a simplified procedure, as well as a separate quota of 10% of the NWF, said an official of the financial and economic bloc. Now RDIF may lose its quota - sanctioned Novatek and Rosneft are vying for support from the NWF , Finance Minister Anton Siluanov said, and it is RDIF’s share that will go under the knife.

Russian Prime Minister Dmitry Medvedev instructed the Ministry of Economic Development and the Ministry of Finance to work with the Russian Direct Investment Fund (RDIF, a subsidiary of Vnesheconombank) on its reform: the fund may receive the right to invest in projects without foreigners - only with Russian co-investors. Now a mandatory condition for RDIF investments is that foreign partners must invest in the project at least for the same amount as the fund. It was to attract foreign money that the RDIF was created.

This is a key principle, a guarantee that the fund will invest the budget money allocated to it not in politically significant projects, but in effective and profitable ones, the founders of the fund explained. In fact, it was possible to attract not one ruble for one, but three, said RDIF General Director Kirill Dmitriev. The principle of mandatory participation of foreigners is protection from fools, the fund manager explained: “Lobbyists suggested that RDIF invest in dubious projects, RDIF always responded to this: okay, just find foreigners who are ready to invest in the project.”

This is about expanding the circle of investors, and not about cutting off foreign partners, the RDIF representative reassures, it is possible to attract foreigners at the next stages of the transaction. The changes are being made for the sake of Russian investors - leading Russian organizations have asked for this, he continues, the decision has not yet been made, this is a matter for the RDIF supervisory board.

The protection against fools will remain, a fund employee assures. Control will be provided by foreign investors who have an automatic co-investment agreement with RDIF (they participate in all RDIF projects), says the fund manager, they account for more than 20% in each transaction. They fully trust RDIF and do not conduct additional audits, said the head of a Middle East fund participating in automatic co-investment.

There is an effective investment tool, why not use it more actively, supports the decision of former Deputy Minister of Economic Development Sergei Belyakov, who participated in the creation of the RDIF: transactions go through several stages of approval, and Russian investors can also provide control.

The main thing is that there is an understanding that it is important to maintain the market nature of transactions and a conservative approach, the RDIF representative emphasizes; transactions in which only Russian investors participate can hypothetically undergo additional control procedures.

For example, transactions only with a Russian co-investor will be approved by a larger number of members of the supervisory board, he suggests one of the options. There will be no problems with automatic co-investors either: if the decision is made, how to ensure protection will also be discussed with them, continues the RDIF representative.

The fund's resources will be greatly reduced even without this. RDIF invested $1.3 billion, it has $2.7 billion in its accounts, and plans to invest another $2 billion by the end of the year. When the fund was created, it was assumed that it would receive $2 billion in capital every year, now the Ministry of Finance has decided that RDIF money will be allocated as needed, i.e. when a decision on investment is made, Siluanov explained.

The status of the fund may also change: Medvedev instructed the Ministry of Finance and the Ministry of Economic Development to work on the issue of purchasing RDIF shares from Vnesheconombank - from the funds provided in the budget for general economic issues. A representative of the Ministry of Finance was unable to say yesterday whether the shares would be purchased by the Federal Property Management Agency or another structure. A representative of the Ministry of Economic Development said that the issue is being studied. Chairman of Vnesheconombank Vladimir Dmitriev called the repurchase of RDIF shares one of the possible forms of support for the bank, but proposed selling them to the Central Bank. First Deputy Chairman of the Central Bank Ksenia Yudaeva then explained that there was no legal opportunity to do this. The scheme is unworkable, an official of the financial and economic block and a person close to Vnesheconombank admitted: attempts to withdraw RDIF from the sanctioned Vnesheconombank could create the impression that RDIF, which works with foreigners, also fears for its status.

While it is not clear how a change in the ownership of shares may affect the activities of RDIF, it is better not to rush into changes, says a federal official. Even when RDIF was created, there was a feeling that the project could be quickly curtailed if there were even the slightest questions about it, sighs an employee of the company that worked with the fund, there is an impression that this moment is close.