Updated July 22, 2008

   While shareholders funnel their assets out of mutual funds, retail investors from the Land of the Rising Sun take interest in Russia's issuers. Russian managing companies coupled with Japanese companies establish funds that do not differ much from regular share mutual funds by filling.

   Two largest managing companies have at once launched funds of the Russian stocks meant for Japanese private investors.

KIT Fortis Investments became a consultant of SMAM Russia Equity Fund launched with Sumitomo Mitsui Asset Management

Company, and Troika Dialog became a consultant of Troika Shinsei Russia Fund established in cooperation

with Shinsei Investment Management.

As mark in both companies, interest to the Russian market is heated by its relatively stable state within current year as compared

to leading world and developing floors.

So, for instance, from January, 21 to July, 16 India's core stock exchange indicator fell by 30%, China's – by 10%, Japan's – by 3,2%, and RTS index showed a 8% growth.

   Projects are launched by the same scheme – Russian part with the affiliated foreign legal entity establishes a foreign fund, and another fund established by Japanese partner buys its units out.

Thus, specialists of Russia's managing companies are engaged in portfolio management. As a result, in investment products line of Japanese part appears a fund oriented to Russia, and its activity provides high-skilled analytical personnel specializing in the Russian market only. As marks KIT Fortis Investments managing director of investments Vladimir Tsuprov,

analogical products differ from funds of global investment companies by two factors.

"Usually, fund of a foreign player consists mainly of securities listed in a basis of index calculation to which he orients; moreover, large portfolio stake is spent to purchase ADR, and these factors do not allow a fund to outstrip a basic indicator". A fund that has local examination is able to operate with less liquid instruments. So, according to Vladimir Tsuprov, now portfolio of "Japanese" fund comprises 30 securities, 10 of which do not belong to a basis of MSCI Russia index calculation.

According Troika Dialog portfolio manager Oleg Larichev, fund of a company that as per documents monitors RTS index, does not almost differ from Troika Dialog – Dobrynya Nikitich mutual fund by portfolio structure and within a year it should become almost identical to it.

  "Russian-Japanese" funds have already managed to collect around $100 million, while Russian shareholders do not please managers with new facilities – according to data of Investfunds portal, within 6 months they have already funneled more than RUR 10 billion out of mutual funds.

Specialists explain such difference of investors conduct by distinctions in economic realities of two countries.

"For Russians that got used to rapid growth within the last couple of years, current profitability does not seem attractive", says Vladimir Tsuprov. Japanese investors' interest is related to their low inflation rate and price stability, as marks Oleg Larichev.

"20% annual revenue is an attractive offer for them".