THE demise of communism in Russia and the economic transition from state-controlled to free enterprise has opened the way for investment opportunities. While potential rewards are thought to be high, so too are the risks. Hong Kong-based company Regent Fund Management has taken the plunge by setting up the White Tiger Investment Company, to take advantage of equity growth opportunities in Russia and its share trading system, which is still in its infancy. Investment will focus on traded companies, mainly on the Moscow and the St Petersburg stock exchanges, and up to 20 per cent will be invested in Vladivostok and other firms in the Far Eastern region. ''Though fairly primitive and illiquid, these stock markets are the focal point for the privatisation process in the former Soviet Union,'' said Regent Fund Management managing director Jim Mellon. The fund will invest in undervalued asset-rich enterprises and potential growth firms, mainly in oil and gas, telecommunications, utilities, property and manufacturing. Russia's huge natural resources reserves, as well as its urgent need for new infrastructure, represent an excellent opportunity for investors. ''We expect share prices in Russia will quintuple in the next three years,'' Mr Mellon said. White Tiger has not been authorised by the Securities and Futures Commission (which means it cannot be sold directly to the public) and, with a minimum investment of US$100,000 (HK$772,000) which may not be accessible for three years, is not a vehicle for investors looking for short-term flexibility. The company, to be launched next month, will initially be structured as a closed-end fund and two million shares will be issued at US$10 per share. Regent will buy 200,000 shares, or 10 per cent of White Tiger, for its own account and the company aims to attract its $20 million investment within 18 months. Regent Financial Services manager Astrid Stapleton said the fund would be closed for either three years or until the directors judged the portfolio to be sufficiently liquid. After that, shares would be issued and redeemed on a monthly basis, giving the fund an open-ended structure. In the event White Tiger cannot invest two-thirds of the $20 million within six months, the company will be liquidated and assets returned to shareholders. The fund will have an annual management fee of 1.5 per cent, an up-front fee of five per cent, and a cumulative performance fee of 15 per cent that comes into effect once profits exceed a 10 per cent average return.