BlackRock Investment Company has completed the first stage of the conceptual and design phase of the future Ukraine Development Fund (UDF) and presented it at the Ukraine Recovery Conference (URC2023) in London.
“We are now moving on to the second stage, which will be very important in terms of regulatory details, rules: how is it organized? how is it regulated? what kind of people will manage the fund? how to ensure good governance at the supervisory level?” – said Philipp Hildebrand, Vice Chairman of BlackRock, at the conference.
According to him, other important issues include the creation of a due diligence mechanism to process the flow of transactions and ensure that there is a sufficient flow of transactions to invest capital after it is attracted to the fund.
Speaking about the possible volume of private investments, Hildebrand mentioned the amount of $50 billion to $60 billion.
“We would like to start with concessional capital, maybe a couple of billion,” he said.
The BlackRock representative noted that these funds could be used to make the first few deals that would prove the concept, show real investment flows, and on their basis it would be possible to scale up the work.
According to him, attracting such concessional capital will reduce risks, which is necessary to mobilize large pools of investment. In addition to the flow of projects, impeccable management is also needed, Hildebrand added.
He said that the first pledge to contribute to the fund during URC2023 was made by Andrew Forrest, an Australian businessman, chairman of the investment company Tattarang and Fortescue Metals.
The BlackRock vice chairman expressed hope that in 20 years, the UDF will be as important an institution as Temasek in Singapore.
“But we need to start with realistic numbers and start with an actual proof of concept by identifying actual investments,” he reiterated.
Hildebrand emphasized that some kind of peace perspective is also needed. “If you want to mobilize private capital on this scale, there has to be a prospect,” the investment banker explained.
He clarified that BlackRock is doing this work on a pro bono basis, advising the government, and expressed a wish that European financial institutions would participate in the project in the future.
Giovanni Salvetti, Managing Director of Rothschild & Co Middle East Limited, also emphasized the importance of several pilot successful deals that could make the front page of the Financial Times, serve as an example and a better incentive for other investors than various conferences.
“Courage is contagious. Not only in defense of the homeland, but also in business,” said the investment banker.
According to him, he is currently working on three possible deals worth more than $100 million with investors who are ready to consider investing in real assets in Ukraine until the war is over, but they also want to have a long-term perspective. In this regard, the emergence of instruments to insure investments against military risks is very important, Salvetti added.
In general, he said that over the past 15 years, Rothschild & Co. has been involved in 80% of deals in Ukraine worth $53 billion, so the company has access to information about what investors want and what they are looking for.
According to the investment banker, he sees three types of investors looking at Ukraine at the moment. First, super-speculative investors who invest in Eurobonds and want to double their money in a year.
“These people don’t need anything you are preparing, they have already invested hundreds of millions of dollars five days after the war started. And they’ve doubled, tripled their money as we speak,” Salvetti said, noting that such investments bring nothing to the domestic market.
He called the second category of investors not so speculative, but brave investors who are ready to invest until the war is over and have not yet decided, while the third category is basic investors. According to a representative of Rothschild & Co, it will be quite difficult to attract the third category today, because they need security, macroeconomic prospects and very firm legal norms.
“Therefore, I think we should focus on the one (category of investors) that can already take risks,” Salvetti summarized.
