GERMAN INVESTMENT MANAGER OPENS DOOR TO RUSSIA A LITTLE WIDER Brings greater array of investment choices in a leading emerging market to European and Middle Eastern investors
Saint Petersburg, Russia, September 04, 2006 – With the world’s number one emerging market in 2005 poised to retain its ranking in 2006, Russia is seen as a haven for investors looking for elevated returns. Russia’s massive ‘Stabilization Fund’ is flush with petro-dollars, while last week’s early repayment of sovereign debt to the Paris Club, a long running boom in the stock markets, 7% GDP growth and coming upgrades in its investment ratings by the major ratings agencies point to Russia producing real results in contrast to hyped emerging markets like India and China. Unfortunately, the average sophisticated investor or small family office has real obstacles to gaining Russian investment exposure. Till now, most have been forced to access Russia via big hedge funds which invest mainly in oil and natural resources stocks. With natural resource stocks showing limited upside, many investors are worried the world’s hottest emerging market may be passing them by. It is this conundrum that Dr. Klaus Richter, longtime CEO of Osteuropa Investitionsholding AG is intent on solving. Richter is determined to give European and Middle Eastern sophisticated investors a leg up in taking advantage of Russia’s rosy economic outlook. If stocks are out, then in Dr. Richter’s opinion, private equity is in. A recent European Bank of Reconstruction and Development (EBRD) report places Russia as the world’s number one emerging market for private equity as well. Results on an industry-wide basis as well as from the results of the EBRD’s own private equity holdings tell the story. The EBRD’s CEE and CIS private equity funds’ portfolio returned a 55% internal rate of return (IRR) in 2005 following a 39% IRR in 2004. On the strength of these numbers, Osteuropa is providing sophisticated European and Middle Eastern investors new avenues of exposure to the Russian market by actively committing its efforts to fill an investment mandate to the EPEG Small Company Buyout Fund. The Fund, managed by Eurasian Private Equity Group Ltd. (EPEG), the Saint Petersburg-based alternative investments company headed by former Russian finance minister Igor Kostikov has announced the commitment by Osteuropa Investitionsholding AG to become a major investor in EPEG’s new private equity fund. While this is Osteuropa’s first investment into EPEG, Osteuropa and Dr. Richter are no strangers to the Russian market, having actively invested in Russia since 1994. Osteuropa will commit to becoming a major investor in the fund through solicitation of its investor base throughout Germany, Europe and the Middle East. Dr. Richter commented ‘we see real obstacles for wealthy individual investors and family offices to take advantage of the tremendous growth in Russia. Private equity is an excellent avenue when it is available. Unfortunately, most of the private equity activity in Russia has been limited to the large multi-laterals such as the EBRD on very unfavorable terms with lockdown periods of 10 or 15 years and other disadvantageous terms. For us, it is a matter of opening the possibility by making a commitment to the EPEG fund and getting the word out and educating investors so that they know they have attractive options. Both with working with such a distinguished group as EPEG and in having a fund with attractive terms better suited for individual investors.”
EPEG managing partner Jeffrey Letino also commented, “Welcoming Osteuropa is a big moment for the Fund. Osteuropa and Dr. Richter’s 15 years investment experience in Russia make them a very experienced partner. Having that quality of partner makes a manager’s job from both the fundraising and management vantage points much easier. We’ve created the Fund specifically for high net worth individuals and family offices, so the terms of the Fund match up well with what Osteuropa’s investor base is seeking.” Board Chairman and Investment Director Dr. Igor Kostikov added, "Our fundraising efforts are focused on Europe and the Middle East, so this is a good fit. Osteuropa’s success in working with local GP’s in Russia is well documented. We look forward to continuing to provide exciting, well-crafted investment projects for the benefit of Osteuropa and all the members of our limited partner base.”
The EPEG Small Company Buyout Fund is intended to provide sophisticated investors with an opportunity to invest in the most dynamic aspects of the small company buyout and property markets of Russia & the former states of the Soviet Union. The EU-regulated fund pursues acquisitions of un-restructured former-Soviet enterprises, operating high-growth companies in the service sector and properties for development. The Fund is managed by its Board of Directors, Dr. Igor V. Kostikov, Jeffrey Letino and Harris Stavrinides. Dr. Kostikov, the former Russian cabinet minister for the financial markets from 2000-2004, serves as the Chairman of the Board of Directors and Fund Investment Director. Dr. Kostikov is the founder of one of Russia’s leading financial services companies, AVK Financial Group though he no longer retains an interest. He has a long history of high profile private equity investments in Russia and is often referred to as Russia’s “most famous fund markets figure of the last several years.” (Business, 20 April 06)
News and other information about EPEG is available at www.eurasianequity.com.
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