The Russian Direct Investment Fund’s (RDIF) chief executive officer Kirill Dmitriev launched a campaign for a Brazil/Russia/India/China/South Africa (BRICS) infrastructure joint fund at the countries’ Fortaleza, Brazil summit earlier this week.
The RDIF fund, which has brought $13 billion of investment into Russia’s economy thanks to international alliances forged since its inception in 2011, intends to pool further international capital with the creation, in 2015, of a supra-national entity that would unite all member states’ sovereign wealth funds.
RDIF has identified common themes among BRICS markets which it believes should be addressed in unison. Among these themes are, on the one hand, the middle classes driving growth through increased spending power, and, on the other, a major gap in infrastructure financing of $1 trillion a year for the coming decade.
The BRICS fund would invest in the equity capital of special purpose vehicles (SPVs) engaged in roads, ports, aviation and municipal infrastructure development. Its size is expected to be several billion dollars.
A BRICS Development Bank, currently under way, will enable third-party debt financing and potentially magnify the scale of projects.
“The exchange of best practice and expertise will enable us to structure infrastructure projects on both a national and international scale in a way that makes them equally appealing to leading sovereign wealth funds, institutional investors and private investors,” said Dmitriev.
“We believe that the fund should focus on projects that either involve several participant countries at once, or on the application of previously successful initiatives from one country to another,” he added.
The BRICS joint fund initiative is the latest of a series of measures to tap into international private equity flows to unlock Russia’s growth potential, following agreements with ten sovereign wealth funds and state financial institutions targeting infrastructure deals. For example, in March this year, China partnered with RDIF to secure high value-added energy infrastructure investments.