Russian National Wealth Fund

Russian National Wealth Fund
Sovereign wealth fund
Founded 2008
Total assets $66.4 bn as of February 2018[1]
Website old.minfin.ru/en/nationalwealthfund
National Wealth Fund, 2008-2017

The Russian National Wealth Fund is Russia's sovereign wealth fund. It was created after the Stabilization Fund of the Russian Federation was split into two separate investment funds on 30 January 2008. The two funds are the Reserve Fund, which is invested abroad in low-yield securities and used when oil and gas incomes fall, and the National Wealth Fund, which invests in riskier, higher return vehicles, as well as federal budget expenditures. The Reserve Fund was given $125 billion and the National Wealth Fund was given $32 billion. The fund is controlled by the Ministry of Finance. One of the fund's main responsibilities is to support the Russian pension system.[2]

The National Wealth Fund will receive funds from investment returns or any excess funds that the Reserve Fund produces. The Reserve Fund is capped at 10% of Russian GDP, and any funds over that will be given to the Wealth Fund. The fund also has accumulated $72.71bn (as of 1 September 2016) from taxes and duties it collects on the production and export of oil and gas.[2]

According to the Russian Ministry of Finance, the foreign debt securities the fund can invest in must have ratings of AA- or higher by Fitch or Standard & Poor's, or a rating of Aa3 by Moody's.[2] Despite this, the fund agreed to buy (on 17 December 2013) $15 billion of Ukrainian Eurobonds, despite the fact that Ukraine had lower credit ratings at the time.[2][3][4]

It has been proposed that the fund put some of its reserves into infrastructure projects in Russia, so it can provide a boost to the slow modernisation of its infrastructure in a time of otherwise anaemic investment.[2] But as of 18 December 2013 this did not happen.[2]

The Russian National Wealth Fund was merged in 2017 with the remaining of Russia’s sovereign Reserve Fund. The Reserve fund was built up over years with profits from oil exports but amid low oil price prices was emptied by the end of 2017 and ceased to exist.

The Russian government still has $65 billion in the National Wealth Fund to cover planned budget shortfalls, but according to financial analysts it might not last for more than three years.[5] The National Wealth Fund with its $65 billion is the only fund left to cover budget deficits, estimated at $21.8 billion in 2018.

References

  1. ↑ Pismennaya, Evgenia; Tanas, Olga (22 March 2018). "Russia's Sovereign Wealth Fund Has a New Plan". Bloomberg. Retrieved 26 March 2018.
  2. 1 2 3 4 5 6 Ukraine bailout could derail Putin's drive to boost Russian economy, Financial Times (18 December 2013)
  3. ↑ Russia cuts Ukraine gas price by a third, BBC News (17 December 2013)
  4. ↑ Ukraine to issue Eurobonds; Russia will purchase $15 bln, says Russian finance minister, Interfax-Ukraine (17 December 2013)
  5. ↑ "Russia's sovereign Reserve Fund Ceases to Exist". The Moscow Times. Retrieved 11 January 2018.
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