Baring Vostok cancels plans for $1.3bn sixth fund

Baring Vostok cancels plans for $1.3bn sixth fund
Baring Vostok cancels plans for sixth $1.3bn fund because of uncertainties caused the jailing of its senior managers / wiki
By Ben Aris in Berlin November 22, 2019

Leading Russian fund Baring Vostok has cancelled plans to raise a sixth fund that could have been worth $1.3bn, as five of its senior managers face fraud changes and three of them languish in prison, the fund announced on November 21.

The fund has suspended plans to raise a new fund because international institutional investors are concerned about “contradictions in Russian and international arbitration law” and the uncertainty regarding the protection of their rights, the fund’s press service told The Bell.

Instead, Baring Vostok will focus on further investing in its fifth fund, selective investments from the fund’s team and Russian co-investors, and managing its current asset portfolio, the press service added.

The press service didn't specify how much it hoped to raise for the sixth fund, but the previous fund had raised $1.3bn.

The arrest of US citizen and Baring Vostok founder Michael Calvey has sent shockwaves through the Russian investment community. Although he and his colleague Phillip Delpal have been released on house arrest their freedoms are severely curbed and they still must face trial where they are accused by a former fellow investor of fraud. At the same time three of Baring’s Russian nationals – Maksim Vladimirov, Ivan Zyuzin and Vagan Abgaryan – have already been in pre-trial detention for eight months and a court recently refused appeals to at least release them to house arrest. The three will have to spend at least another year there until the trial begins.

The mandate for private equity investments into Russia is limited, but Baring Vostok dominates the business in Russia and usually gets allocated a large amount of that money thanks to its outstanding record for hitting “home runs”, Calvey told bne IntelliNews in earlier interviews.

Most famously, Baring Vostok was a very early investor into Yandex which eventually IPO’d on NASDAQ with a market capitalisation of over $11bn. The fund remains invested in several tech unicorns and remains an active player in the market.

Managers of other funds have told bne IntelliNews that the Baring Vostok sage has made fundraising virtually impossible as international investors hang back waiting for a resolution to the case, which has increased the perception of political risks.

Many senior figures amongst Russia’s liberal elite, including presidential Ombudsman for Business Boris Titov, have protested against the arrests, arguing that the case is clearly a commercial dispute with Baring's former partner, Kremlin-linked Artem Avetisyan, and should be settled in the arbitration courts, and not with a criminal case that would require arrests and a trial.

Calvey denies any wrongdoing and says the case is being used against the firm in a corporate dispute over the control of Vostochniy Bank.

Baring Vostok is one of the largest and oldest private equity firms operating in Russia since the early 1990s, managing more than $3.7bn in assets.