For decades, hedge fund founder Richard Deitz built a reputation as one of the most prominent Western investors operating in Russia and other volatile emerging markets. Today, however, the founder of New York-based VR Capital has shifted his focus decisively toward Ukraine, becoming one of the largest foreign investors in several strategically important Ukrainian state-linked companies during wartime, reported Ukraine Business News.

According to Bloomberg, VR Capital now holds substantial positions in the debt of Ukrzaliznytsia, Naftogaz and Ukrenergo — companies central to keeping Ukraine’s economy, energy system and military logistics functioning under constant Russian attack.

The pivot marks a striking reversal for Deitz, who helped build Moscow investment bank Renaissance Capital during the turbulent 1990s and spent years investing heavily across Russia and the former Soviet Union. Deitz told Bloomberg that the shift began after Ukraine’s 2013-2014 Maidan revolution and Russia’s subsequent political trajectory.

“Ukraine chose a European path, while Russia moved toward authoritarianism,” he said.

By the time the war started in 2022, roughly 20% of VR Capital’s assets were already linked to Ukraine, according to the report. The fund estimates the value of its Ukrainian-related investments at between $5bn and $8bn.

That positioning proved unusual. While many foreign investors rushed to sell Ukrainian assets after the invasion, VR Capital instead increased its exposure, betting that financial markets had become excessively pessimistic about the country’s prospects and the ability of key state companies to continue operating during wartime.

That strategy has made the hedge fund one of the most influential players in Ukraine’s increasingly complex sovereign and quasi-sovereign debt negotiations.

At the centre of the dispute is Ukrzaliznytsia, the state railway company that became a critical wartime lifeline after Russia’s invasion. The railway evacuated civilians from front-line cities, transported military supplies and maintained export routes despite repeated missile strikes on rail infrastructure, locomotives and power systems.

Before the war, Ukrzaliznytsia had approximately $900mn in outstanding international bonds. In 2022, creditors agreed to freeze repayments for two years as part of broader debt relief efforts supported by Western governments and the IMF.

However, tensions have intensified since the company effectively defaulted in January 2026 and entered a new restructuring process covering nearly $1.1bn in Eurobonds.

Creditors rejected an initial Ukrainian proposal that reportedly included a 20% write-down on principal, with negotiations continuing over coupon reductions, maturity extensions and the timing of any return to partial debt servicing.

The talks have become politically sensitive because Ukrzaliznytsia remains wholly state-owned and closely tied to Ukraine’s broader sovereign debt strategy. Kyiv argues that preserving cash is essential while the country continues to finance the war and repair damaged infrastructure.

Some creditors, however, contend that the railway continues generating operational revenue and remains too strategically important to collapse outright. Funds linked to VR Capital are understood to be among the largest holders of the bonds and are taking an active role in negotiations.

The situation highlights a broader dilemma facing Ukraine and its international backers: how to balance wartime financial support with maintaining confidence among global investors who may ultimately be needed to finance reconstruction.

Deitz himself acknowledged that VR Capital has a reputation as an aggressive distressed-debt investor, having previously pursued complex restructuring opportunities in countries including Argentina, Venezuela and Lebanon. Yet he has also argued publicly that maintaining investor trust will be essential for Ukraine’s long-term recovery and access to international capital markets once the war ends.

Ukraine’s financial authorities have attempted to walk a delicate line between securing temporary relief from creditors and avoiding a complete rupture with international investors. Western governments and institutions supporting Kyiv financially have also been wary of pushing creditors too aggressively, concerned that doing so could undermine future appetite for Ukrainian debt.

The outcome of the restructuring battle may therefore extend beyond Ukrzaliznytsia itself. Analysts say it could become an important test case for how international investors approach wartime Ukraine — and whether distressed debt funds such as VR Capital ultimately emerge as opportunistic traders or long-term backers of the country’s recovery.