There haven't been many international success stories in Russia's private-equity market. One exception has been TPG (formerly known as Texas Pacific Group), which jointly with Russian state bank VTB last year bought into Lenta, Russia's fifth largest retailer, for a purchase price of $115 million.

TPG aside, Russian PE specialists are unimpressed by the inroads made by international investors into local PE markets in the past decade. According to a panel at the AsianInvestor and FinanceAsia Russia Capital Raising and Investment Summit in Hong Kong, they feel foreigners went about things the wrong way and, as a result, the domestic PE market remains dominated by local players.

If an investment was made in 2008, it is most likely underwater, but prices have fallen since and Moscow-based UFG Asset Management has just been investing a fund it has raised. The asset allocation, in chunks of $30 million to $60 million, has been in secondary projects and one start-up that is charged with building telecommunications towers.

"2009 and 2010 vintages for private equity are going to be fantastic, and we are hopeful we will achieve four times returns on the $100 million that we have just put to work,' says Florian Fenner, managing partner at UFG. "Nevertheless, if offered a good price for an investment now, we might go for it. To date, all our previous exits have been via trade sales, never by IPO."

Fenner perceives that the best opportunities in Russian investment are to be found in agriculture (his firm owns a farm) and private equity. He does not favour public markets, due to what he sees as extreme over-valuations.

He envisages opening a new fund shortly with a view to raising $250 million. The format of the investments is straight equity or what he characterises as "working capital at equity pricing", as there really is no mezzanine financing in Russia.

Gleb Davidyuk, a partner at Mint Capital, who has been working in the private equity field for 15 years, feels early-stage private equity is too risky in Russia. "Our industry is currently with companies in a more advanced stage of growth, that are cashflow positive," he adds. "The market is just $5 billion in size and the challenge is to find deals."

He is optimistic, though, that the PE segment will grow in Russia, and is heartened by the fact that in the market's brief life span to date, realised investments have recorded 300% profits in his books.