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Tuesday, September 11, 2012

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Russia’s new SWF seeks bond and equity exposure

Russia is planning to launch a new state-owned investment agency next year to invest the country’s oil wealth in global financial markets, finance minister Anton Siluanov tells Euromoney in an exclusive interview.


The new Federal Financial Agency (FFA) will invest excess government revenue generated from high oil prices in a more diverse range of domestic and international securities, including bonds and equities for the first time, under an investment strategy similar in part to that employed by the Norwegian sovereign wealth fund (SWF).
 
 Anton Siluanov, Russian finance minister
The FFA will be managed by investment professionals and will be free from government intervention, according to Siluanov.

Under the plans, the finance ministry is to transfer the management of $150 billion-worth of investment funds in Russia’s Reserve Fund and the National Welfare Fund from the central bank to the FFA.

Siluanov believes the FFA will start operating fully early next year.

“This agency will be staffed with top-notch managers, experienced in financial markets,” says Siluanov. “It will be for them to determine the most effective way to invest the funds held by our Reserve and Welfare Funds in the most effective fashion, be it domestically or on the international market.”

A proportion of the FFA’s investable funds will be invested in assets such as equities and corporate bonds for the first time, increasing diversification and marking an evolution in strategy beyond a traditional focus on foreign sovereign bonds, particularly US Treasury bills.

“The range of instruments the fund can be invested in will be substantially enlarged in scope to get higher revenues from these investments, while at the same time retaining sufficient stability of those investments,” says Siluanov.

Although the exact amount is yet to be finalized, Siluanov believes between 15% and 20% of the FFA’s funds could be invested in shares. He adds the agency will not be restricted to buying shares in state-owned banks Sberbank or VTB.

“The managers for the FFA will be guided by considerations of profitability and risk,” says Siluanov. “It will be up to the managers of the agency to make investment decisions. If they come to the conclusion that such an investment will be profitable, why not?”

See the September issue of Euromoney for more news on Russia's sovereign wealth fund.




Final days of Ricardo Salgado and Banco Espírito Santo

Euromoney Pulse Survey: Renminbi’s internationalization continues apace
When BES collapsed earlier this year, markets briefly feared a return of the crisis to Portugal and to Europe. Even after the bank's bailout, investigators still pore over bank documents, transfers and deals, trying to make sense of Salgado’s last days battling to keep his empire afloat. The backstory is of an extraordinary decades-long rivalry between the country's two pre-eminent business families.