Interesting Telegraph (London) article regarding a decision by News Corp. (NWS) to consider pulling out of Russia after learning that the offices of its outdoor advertising firm were raided. As stated by Rupert Murdock,

"The more I read about investments in Russia, the less I like the feel of it. The more successful we'd be, the more vulnerable we'd be to have it stolen."

As Russia continues to generate crude oil revenues, capital available for investment will grow, as will interest in investment opportunities. Yet, experiences such as the one encountered by News Corp, along with recent confrontations with Georgia, will certainly cause some to questions the risk-reward of any such investments. As more companies consider managing risk, including political risk, the BRIC may start to become the BIC. Regardless of opportunities, companies are nervous about taking on any unnecessary risk. The News Corp decision may be just the beginning, with more countries than Russia being affected.

Companies are expected to shift investment over the next five years from the U.S. to BRIC countries according to KPMG International, as reported at Financial News Online. As a result of the shift in investment, by the year 2014 China is expected to be the leading recipient of corporate investment worldwide, rising to 24%, while the U.S. falls to 23%. Of the BRIC countries, India is expected to have the largest shift in corporate investment during the next five years, going from 8% to 18% of worldwide corporate investment. Part of the shift is explained not only by the emergence and growth of the BRIC economies, but also by a desire for corporations (and investors in corporations) to diversify and take on greater international exposure.

A recent Reuters article highlights how 57% of U.S. venture capitalist are now investing outside the U.S., compared to 46% last year. While a contrarian might argue that this is an indication of a top in the international markets, it does give clues as to which markets are still receiving capital, and what sectors in each market are receiving attention. While the top countries for receiving new U.S. capital continue to be China and India (approximately 20%, or $9 billion of total capital flowed outside the U.S., with about $2.5 billion going to China and India, with software mentioned as one of India's strengths), money is also beginning to flow into other markets.

In addition to the usual BRIC countries (Brazil and Russia in addition to India and China), VC money is flowing into Taiwan (for semiconductors), Japan, Israel (software), Germany (alternative energy, medical devices, software), and the United Kingdom (software). U.S. companies, even when not making direct investments, are also stepping up interest in partnering with developing international companies. In particular, IBM was mention as a company looking for partners in technological innovation. It is continuing to invest in the BRIC countries, along with interest in Canada, Peru, Vietnam, Russia, and Ireland, although no specific companies were given. Warren Buffett and Berkshire Hathaway have recently been looking for opportunities in Germany and Asia.

Of course, the real story may be that since many of these countries are continuing to do well, it may be U.S. companies that increase their interest in receiving capital infusions from overseas. Investment from Middle East allies, especially in financial companies, tech, and large industrials have been commonplace for years, but investment from China and India, as well as other countries with double digit growth economies, and/or growing petrodollars, will no doubt increase. Just last month a WSJ article discussed how Brazil, originally thought the be the lightweight newcomer in the BRIC grouping, has set up a sovereign-wealth fund to invest its extra currency generated from its growing position in agriculture and natural resources, in particular its increasing crude oil exports. As the U.S. continues to figure out its energy policy, and whether we even have one, it may find itself not calling the shots anymore as it looks for ways to repatriate its exported dollars (from imported energy) back into the capital needed to continue domestic economic expansion.

We tend to only focus on private equity in the U.S., but private equity investment is increasing across the globe. As for the four BRIC countries (Brazil, Russia, India, and China), India is leading the pack in the amount and number of deals being done. In U.S. dollars, there was $7.4 billion of private equity investment in India last year, compared to $2.1 billion in China, $3.2 billion in Brazil, and $924 million in Russia. As for the number of deals, India was also at the top with 119 deals completed last year, compared to 73 deals in China, 17 deals in Brazil, and 19 deals in Russia. Reports also have 42 private equity deals so far this year in India, worth approximately $1.1 billion. As a comparison, through Q3 of 2007, 295 U.S. private equity firms had raised $199.4 billion, which was more than the $154.1 billion raised by 232 firms in 2006. Still a long way to go, but private equity is on the move internationally, and surely will see increased growth as sovereign wealth funds look for places to put their new found commodity wealth.