Unit Investment Funds in Modern Russia: Critical Analysis

Abstract

Over the past three years, Russian unit investment funds (UIFs) have shown high growth rates. One reason for this is decreased income from bank deposits. However, the assets of UIFs remain meagre as compared with those of similar organizations in Western developed countries. Over half of UIFs shares (about 2 million units) holders are those who invested their privatization vouchers in funds a quarter of a century ago. Investment performance has been deeply unsatisfactory, and now the average assets per person average very nominal two thousand rubles.In contrast to foreign regulated investment funds, Russian unit investment funds mainly serve not the general public, but a small group of qualified investors holding shares worth hundreds million rubles. In recent years, the Bank of Russia has significantly lowered UIF requirements for qualified investors, expecting that they will at least partly attract Russian capital from foreign offshores. Still, it is not clear, whether the regulator’s measures will reduce capital outflow or, on the contrary, increase outflows.