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Russian

Hedge funds to get green light in Russia
At the initiative of the Federal Service for Financial Markets and the State Duma

Hedge funds for qualified investors could appear in Russia as soon as next year, as the State Duma is due to discuss the second reading of amendments to the bill on investment funds shortly, Tatyana Medvedeva, an expert with the Federal Service for Financial Markets, told RBC Daily. The amendments, she said, would allow asset management companies to make highly profitable operations, including with derivatives. The categories of hedge funds will be defined using the regulations of the Federal Service for Financial Markets. Russian hedge funds are expected to become a popular investment tool.

Earlier this week, the State Duma Banking Committee considered several dozen amendments to the bill on investment funds, recommending many of them for second reading approval by the State Duma. The amendments were prepared by the Federal Service for Financial Markets and submitted to the State Duma by Vladislav Reznik, Chairman of the State Duma Banking Committee.

Approval of the amendments by the Duma would provide an opportunity for hedge funds to appear in Russia, Tatyana Medvedeva told RBC Daily. Although the bill does not define hedge funds, the possibility of their creation will be ensured by several provisions contained in the bill, she said. The bill expands opportunities for asset management companies of closed-end and interval funds to carry out operations with various instruments and speculative operations aimed at earning high profits, including operations with derivatives. As for the categories of hedge funds, they will be defined in the regulations of the Federal Service for Financial Markets, Medvedeva said. In addition, the appearance of hedge funds in Russia will require the definition of qualified investors, for which these funds are to be designed.

The amendments envisage not only closed-end, but also interval mutual funds for qualified investors, according to Medvedeva. This will allow investors to withdraw from funds with minimum transaction costs, making investment in such funds more liquid, she stressed.

Andrei Podoinitsyn, President of the National League of Management Companies, welcomed the prospect of Russian hedge funds. One of the most urgent problems faced by our market is the lack of investment products, along with the lack of regulations for many operations available in the West, he complained. In the medium term, I hope, national hedge funds will become more widespread, especially given the trend for the repatriation of investment, Podoinitsyn added.

Valery Petrov, General Director of the Ingosstrakh Investitsii management company, noted that Russian hedge funds could also be seen as an alternative to investment in futures and options. Market traders who prefer hedge funds will be able to invest at home, improving the countrys competitiveness, Petrov said. Meanwhile, he doubts that Russian management companies will begin to transfer funds from foreign into Russian hedge funds, as western funds are tailored for either foreigners or Russians who already had taken their funds abroad. That is why competition between local and foreign hedge funds, run by our management companies, will be not for old assets but for new clients, Petrov stressed.

It will be more convenient for Russian management companies to service local clients through domestic hedge funds, believes Oleg Zheleznov, managing partner at Da Vinci Capital. It would also be good if these funds, as well as mutual funds, were exempt from tax. In some countries such as Ireland or Luxembourg, this is possible, he said.

Analytical department of RIA RosBusinessConsulting

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