Аналитика

Investment company Aurora Russia Limited serves as a private equity fund on Russian market. What were the reasons to start private equity business and how did the company start? The idea of Aurora came up because at that time there were no other listed private equity funds in Russia. I thought that there was a particular niche for this type of vehicle and it also gave the market an opportunity for some exposure in Russia. Aurora Russia Limited is listed on the London Stock Exchange. Why did you decide to go to the LSE? Was it a hard process for a Russia-focused fund? Like most exchanges, there are a series of regulatory steps that you need to take to become listed. I chose London because I believed that there was much interest in Russia and the opportunities here in private equity.

Aurora manages 90 million GBP and has 5 investments in the business, consumer and financial services sectors. There are two partners, one investment officer, an office manager, and a secretary.

We are always looking for new opportunities in the market. We are now fully invested, but are in the process of raising another fund.

We look for dynamic companies in high growth sectors backed by innovative and driven management teams. For an emerging market like Russia, you have to take into consideration the risk premium for investing here. That risk premium is estimated at 20%, so you would need to deliver returns of over 50% for it to be interesting for investors. In order to achieve the maximum returns, we are very “hands-on” with our investments. Not only are we on the boards of all the portfolio companies, but we are also very much involved with the management to bring value, raise third party finance, and position the companies for exit.

I prefer to invest in the services sector because it’s new to Russia and it’s also one of the fastest growing sectors. There is still an opportunity to become first in your sector and this is an area where attractive exits are more likely.

Guernsey is one of several off-shore jurisdictions, but we chose it because it has a good reputation and it has the appropriate infrastructure for us to do business.

Private equity is growing in Russia, but there remains a number of obstacles for it to achieve its true potential. For example, investors often pose the question, “why would I invest in Russia if Russians themselves aren’t investing in their own country?” That’s a difficult question and it highlights that if Russia wants domestic or foreign investment, it will need to address the concerns of investors. For example, there must be a stable base of rule of law so that if you run into problems, you will be protected by the law. It doesn’t always work that way in Russia, but that is also a reason why good investments here produce higher than market returns to investors. Nevertheless, private equity in Russia is still tiny compared to the other BRIC countries.

There are a number of opportunities just because so many established businesses elsewhere are new to Russia. But again, the biggest threat to Russia is the perception of a lack of rule of law. Almost everyone views Russia as an opportunity, but in the long run, it will need to demonstrate that the rights of investors are protected. It takes time to do this, but action speaks louder than words.

Since we are fully invested, we are starting to raise a new private equity but this time it will be a typical LLP structure.