The $10 billion Russian Direct Investment Fund (RDIF), mandated to co-invest into Russian companies alongside foreign partners, is renewing its focus on agribusiness.
The state fund has invested around a third of its assets into infrastructure since its inception in 2011, so is now focusing on building out its exposure to other sectors that include real estate and agri.
In agribusiness in particular, the fund has been building relationships that are now coming to fruition, according to Sean Glodek, director of RDIF.
“Investing into agriculture is not new for RDIF, but it has intensified as our new co-investment relationships bring additional expertise and commitment to this sector,” said Glodek.
“We are focused on improving agriculture sector productivity by deploying global best practices and know-how alongside our foreign co-investors, including leveraging their relationships to take advantage of global supply chains,” he added.
The main opportunities within agri are in companies that need improving; the RDIF team is not interested in ‘buy-and-hold’ opportunities, said Glodek. And this is largely because Russia’s agribusiness sector is still relatively undeveloped and the country relies on imports to feed its population.
“In Russia, there is a shortage of management with experience in agriculture and companies that can retain necessary talent to improve harvest yields,” he told Agri Investor. “There are also very few modern large-scale farms raising livestock, or even milk. This presents a big opportunity for investment in import substitution and productivity improvements.”
The fund has relationships across the agri supply chain, including commodities houses, operators and equipment companies. The investor base is predominantly made up of sovereign wealth funds from the Middle East and Asia, although RDIF has also invested alongside pension funds, private equity firms, venture capitalists and large corporations.
While the Ukraine crisis — the annexation of Crimea by Russia — has closed the IPO market for Russian companies globally, Glodek believes there are some positives to come out of the situation too.
“We have not noticed any pullback on the private equity side as a result of the Ukraine crisis and ensuing sanctions on Russia,” he said. “If anything, co-investors from the Middle East and Asia have realised that now could be a good time to invest because opportunities are cheaper. Even some US institutions are saying that prices for Russian companies are now more reasonable and provide good risk-adjusted opportunities. And our pipeline reflects this.”
Companies that were going to IPO are also now selling at more reasonable pre-IPO prices, he added.
RDIF is exploring various potential investment opportunities that include a livestock feed producer, a large farm operation in southern Russia that wants to expand its harvest operations, a beef processing company and a leading chicken producer.