[Mb-civic] Carlyle abandons $300m Russian fund plan >By Peter Smith in London

[Michael Butler]

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Carlyle abandons $300m Russian fund plan
>By Peter Smith in London
>Published: May 12 2005 22:03 | Last updated: May 12 2005 22:03
>>

Carlyle on Thursday abandoned its efforts to raise a $300m fund dedicated to
Russian investments, the second such failure for the US buy-out group.

It declined to comment on fundraising last night but the group said the
investment climate in Russia did not warrant a dedicated team.

The failure to attract investors is a blow to Russia's fledgling
private-equity industry, especially as Carlyle is regarded as one of the
private-equity world's most sophisticated fund-raising groups.

An investor who initially expressed interest in the Russia fund said: "For
western investors, Russia's risk profile currently lacks the predictability
to give us confidence in returns. The investment market [in Russia] is very
volatile at the moment."

Carlyle said it had not given up on the region and might make investments in
Russia out of its European and US buy-out funds.

The group last month closed the world's biggest buy-out fund at $7.85bn. It
has a portfolio of 28 funds, ranging from venture capital and distressed
debt to geographic and sector-specific buy-out funds, with $25bn under
management. Peers regard it as a "fund-raising machine".

Carlyle had a team of four investment professionals working on Russian
deals. Three of those have left the group, and the future of the fourth is
not known.

Carlyle had a brief relationship with Mikhail Khodorkovsky, formerly chief
executive of Yukos oil company, which ended in May 2003. Mr Khodorkovsky was
a special adviser to the group and sat on Carlyle's energy-advisory board
but was not involved in any of its fund-raising efforts.

It is the second time Carlyle has had to rethink its strategy for Russia.

The group first set up an office in Moscow in 1998 but closed it in 2000.
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