RUSSIA FORUM BUZZ. New Era for Private Equity: Shopping Spree or Massive Slowdown?



Mark Tluszcz: Optimistic on the prospects for private equity, even in the current environment, though the exit phase has become complicated. He believes that the private equity business now is in the same stage as venture capital in technology in 2003, when projects like Skype were started. Tluszcz thinks that fortune favors those who come early. He thinks that internet projects are interesting in Russia, as the population is willing to buy online. He also believes that the European venture industry is still building following US steps, and Russia is a part of the European venture industry.

Lila Vad: The downturn may last for two to three years. Good talent is hard to find, but it is now becoming easier. It is now possible to negotiate better terms and obtain more control. In the current situation, investors have more rights. She says that each sector needs a different strategy now. Vad thinks that the financial sector is now attractive, as it is a backbone of the economy and a recipient of government aid. She also likes the Russian health industry and insurance sector, which have great potential.

Richard Seewald: Looks at Russia in a 10-year horizon. He says that returns in Russian private equity over the last five years have consistently outperformed those of other countries. Seewald thinks that the golden age of the Russian private equity may come in the next five to seven years, but now the segment has to be institutionalized. The environment will be challenging over the next three years.

Sergey Sheshuryak: Agrees that the overall outlook for the sector in Russia is optimistic, but the market still has to be developed. The next one to two years will be tough. He thinks that the role of private equity in emerging markets is to finance fast-growing companies, not changing ownership. Sheshuryak thinks that the crisis will force a healthy cleanup of the private equity universe after the excessive growth of previous years. He also thinks that the government’s role in creating the industry is very important. It took 40 years for Americans to form the industry and it will be a long process in other countries, including Russia.

Hosein Khajeh-Hosseiny: Governments may take longer time horizons than private investors. Private funds have to deliver short-term results for their investors. This means that governments and private investors do not compete in private equity. He thinks that now is a good time to capitalize in a private equity industry. If you need to obtain high returns after the crisis, you should start searching for new projects now.

Ivan Rodionov: The Russian government is creating many funds and is very active not only in traditional venture capital areas as telecoms and IT but also in new materials, such as biology. The government hopes to establish a more diversified economy with the help of these funds. The state also tries to support people’s initiative, which is important in times of crisis. Rodionov thinks that the most attractive areas in private equity are consumer products and services. This is proven by the experience of the 1998 crisis. It is hard to find interesting projects, but those who do will earn a lot.

PANEL:

Michael Obermayer, Chairman of the Supervisory Board, Russia New Growth Fund
David Jackson, Chief Executive Officer, Istithmar World
Hosein Khajeh-Hosseiny, Managing Director, Northgate Capital
Ivan Rodionov, Member of the Board, Russian Venture Capital Association
Richard Seewald, Partner, Alpha Associates
Sergey Sheshuryak, Partner, Adams Street Partners
Mark Tluszcz, Co-founder and Managing Partner, Mangrove Capital Partners

Troika Dialog