LONDON -- Baring International Investment Management aims to tap into what it sees as massive unrecorded economic growth in the former Soviet Union with its $180 million First NIS Regional Fund for Western investors.


"We are going to access some of the second-tier companies and also identify private companies or joint ventures which are a pure play on the local economy," said Richard Sobel, joint manager of the fund.


He said the attractions were not only natural resources but a domestic market that was relatively unpenetrated for consumer products and services and which, in the future, will largely be served by domestic companies.


Most Western money has gone into utilities and energy companies, bought on the basis that they are much cheaper on an asset-valuation basis than their Western counterparts. Russian oil companies' reserves, for example, are valued at between 10 and 40 cents a barrel, compared with more than $5 a barrel for Royal Dutch/Shell's.


"There are undervalued assets, but it is important to understand the business and come to a view as to whether those assets will ever make any money," said Sobel.


The NIS fund, which raised $20 million from the European Bank for Reconstruction and Development and $15 million from the International Finance Corp, anticipates that about 60 percent of its investments will be made in Russia. Its portfolio also extends to the Ukraine, Belarus, Kazakhstan, Uzbekistan, Azerbaijan, Moldova, Georgia, Turkmenistan, Kyrgyzstan, Armenia, Tajikistan, Latvia, Lithuania and Estonia.


Baring, which in the 19th century was one of the main London agents for the Tsarist government, also said that in order to protect its investments it would seek private equity or some form of management rights. The Luxembourg-listed closed-end fund aims to get its $180 million invested during the next year and a half.