By Megan Davies and Douglas Busvine
ST PETERSBURG, Russia (Reuters) - President Vladimir Putin will court investors this week at Russia's answer to Davos, but one who will not be attending is Steven Dashevsky, a fund manager who is looking at diversifying away from the country.
Once optimistic about Russia, Dashevsky, who manages a $100 million (63.4 million pounds) hedge fund, has little hope for a new round of investor-friendly economic reforms.
He has been disappointed by the lack of progress in the past few years and is not expecting any change after Putin's inauguration for a new six-year presidential term in May.
"Talk is cheap - there's nothing they have done in terms of real market reforms or real liberalisations," said Dashevsky, founder and chief investment officer at Dashevsky & Partners.
"There have been so many false starts and so many missteps and so many missed expectations that investors' patience is wearing thin."
The St Petersburg International Economic Forum will be Putin's first face-to-face meeting with major investors since his re-election in March, a meeting which offers him a platform to showcase his plans for the NEXT (NXT.LO)six years.
With Russian markets badly underperforming their emerging markets peers, it will be a tough sell for Putin, but aides say the tide of money leaving the country has more to do with Europe's debt crisis than any home-grown problems.
"European banks are closing their business all over the world to save themselves," Stanislav Voskresensky, Russia's deputy economy minister and the main organiser of the meeting, told Reuters.
Putin, Russia's paramount leader for the past 12 years, will be at the three-day forum only for one day, following his trip to a Group of 20 summit in Mexico and preceding a visit to Israel.
LESS TALKS, MORE ACTION
He is due to meet prospective investment partners who between them manage $1 trillion - such as TPG Capital's David Bonderman, Apollo's Leon Black, China Investment Corp's Lou Jiwei and Kuwait Investment Authority's Bader Mohammad Al-Sa'ad - a source familiar with the forum plans said.
Those investors sit on the international advisory board of a state-backed fund that is seeking to drum up investment into Russia by private-equity investors and sovereign wealth funds.
The board of the Russian Direct Investment Fund will hold its inaugural meeting in St Petersburg's Stroganov Palace on Wednesday to discuss progress and ways to improve Russia's investment climate.
"Investors are looking for growth stories, and Russia is a growth story with attractive valuations," said Kirill Dmitriev, CEO of the fund, in emailed comments.
"The macroeconomic backdrop is rock solid - low debt, low unemployment, a balanced budget, a growing middle class. That looks phenomenal if you are sitting in Europe and looking east."
While Russia bulls and officials point to an improving economy and increasing foreign direct investment, sceptics say they want to see less talk and more action on privatising state enterprises, stemming capital outflows and tackling corruption.
They also want to see real progress on diversifying the energy-reliant economy.
The government has said it wants to privatise a number of state-owned assets but that effort has stalled with sale of a stake in Russia's Sberbank still awaited.
"In the aftermath of the election, I think people want confirmation that the new government will push ahead with liberal reforms, that will be the overriding demand from investors," said Peter Westin, chief economist at Moscow brokerage Aton.
While Russia wants to improve the investment climate, BP, one of the biggest foreign investors, has announced it will sell its $30-billion stake in its profitable but conflict-ridden Russian oil venture TNK-BP.
STOCKS, ROUBLE
The market has not reacted positively to Putin's return. Russia's IRTS stock index is down 32 percent since Reuters quoted sources as saying last July that he would seek a return as president after four years as prime minister.
In the past seven months, Putin, 59, has faced the biggest protests since he first rose to power in 2000, with tens of thousands of people taking part in some of the demonstrations.
Russian stocks have underperformed prices for its main export, oil, with Brent crude oil futures down by 16 percent over the same period. Emerging markets stocks are down 18 percent. The rouble has weakened 12.4 percent since its 2012 highs of 29.03 roubles to the dollar in February.
"Generally, the news from Russia over the last 12 months has been nothing or negative and it's the first opportunity for the government to draw a line under that and announce the next phase," Chris Weafer, chief strategist at Troika Dialog, said.
Net capital outflows also continue unabated - Russia saw $46.5 billion in capital flight in January to May, more than half the $80 billion during the whole of 2011.
Held during the northerly city's White Nights when the sun does not set, the St Petersburg forum is an event that few bankers or CEOs interested in Russia can afford to miss. Deals and initiatives are also typically announced at the event.
Putin has urged Gazprom's partners in the vast Shtokman gas field to make a final investment decision on its plan to extract gas from the Arctic seabed, and signalled there could be progress at the forum.
Delayed by years of talks over financing, the project is expected to announce it has gained a new investor in Royal Dutch Shell.
(Additional reporting by Lidia Kelly; Editing by Timothy Heritage and Alison Williams)
