RDIF, KIC form $1bn cross-border platform

The $10bn government-backed fund and the $57bn Korean sovereign wealth fund hope to stimulate cross-border investment and trade between the two countries.

The Russian Direct Investment Fund (RDIF) and the Korean Investment Corporation have signed a memorandum to form the Russian-Korean Investment Platform, to focus on cross-border investments that fulfill strategic interests for both countries, according to an RDIF statement.

The signing ceremony in Seoul was witnessed by Russian president Vladimir Putin and Korean president Park Geun-Hye. Through the new platform, both the $10 billion Russian government-backed fund and the $57 billion Korean sovereign wealth fund intend to invest in “companies and projects that facilitate trade and encourage investment cooperation between the two countries”.

According to a KIC spokesman, RDIF and KIC have each committed an initial $250 million to the platform, but that is expected to increase to $500 million each to bring the platform to $1 billion in size. The timeframe on the increase, however, was unclear.

Although the platform does not have a specific sector focus, a KIC spokesman told Infrastructure Investor that for now the platform will mostly focus on infrastructure investments and the energy sector.

Kirill Dmitriev, chief executive of RDIF, pointed out that Korean investment into Russia has declined approximately sixfold since 2009. “I am confident that the creation of the Russian-Korean Investment Platform will help to reverse this trend and act as a catalyst for strong growth in investment flows between our two countries,” he said in the statement.

Russia remains the 11th-largest trading partner of Korea, according to KIC chief investment officer Lee Dong-Ik, but has only a 2.1 percent share of the country’s trade. With over 1,200 Korean companies having invested capital in Russia as of now, “the launch of this joint investment platform will provide additional businesses from both Korea and Russia to further develop these relationships,” Lee said in the statement.

This is the fifth tie-up with international governments that RDIF has sealed over the past two years. It established its first joint platform with the China Investment Corporation in 2011, but the other four – with India, Japan, Abu Dhabi and now Korea – have all been formed in the past 11 months. Many of the platforms have a focus on infrastructure investment.

KIC, on the other hand, has been treading cautiously in overseas investment so far. It has made only four commitments to unlisted infrastructure investments to date, two of them in funds, according to Infrastructure Investor’s Research and Analytics division. In June, however, Lee revealed that KIC planned to gradually expand its alternative assets allocation to 25 percent in the medium to long term, from its current level of around 15 percent.