Russia's Warm Bear Hug for Private Equity

While Russia has just met all the requirements for joining the World Trade Organization, foreign investors still view it as one of the worst places in the world to put their money. Even President Dmitry Medvedev, speaking at the APEC summit in Hawaii on Nov. 13, acknowledged complaints that Russia doesn’t always stick by the rules and said its judicial system is “still not as developed” as in many other countries. Now the government is using a new $10 billion sovereign wealth fund, its first, in a bid to attract foreign money.

The Russian Direct Investment Fund (RDIF) will start operating in early 2012 with an unusual mandate. It will only do deals in which foreign investors are also participating. “If we go to Western or Asian investors and they’re not interested in something, we can’t invest either,” says RDIF Chief Executive Officer Kirill Dmitriev. “We have this built-in protection mechanism to make sure we’re investing in things that make sense.”