Updated September 9, 2008

   Russia's National Wealth Fund (NWF) enters the corporate securities market.

About 80% of its facilities will be invested in stocks and bonds of the foreign companies mainly, but the Russian organizations

will get the stake as well.

   In 2009, the NWF will be split off from the Central Bank of Russia, and about 50% of the Fund's facilities will be invested in stocks, and up to 30% – in the corporate bonds of the foreign issuers, as Deputy Finance Minister Dmitry Pankin said. However, 5% more of the Fund's facilities will be allocated to the direct investments. In addition, it would be reasonable to include derivatives.

   This is the new investment strategy of the National Wealth Fund, and the Ministry of Finance will introduce it to Russia's government on October, 1. According to Mr.

Pankin, the major part of the facilities will be invested for 10 to 15 years.

   The government's official explained that the Fund's facilities could be invested in stocks and bonds of the highly rated companies of the countries in the Central and Eastern Europe, as well as BRIC countries (Brazil, Russia, India, China). This financial strategy can be implemented, if the strategy of the budgetary earnings, VAT amount in particular, remains unchanged, he adds.

Otherwise, it will be possible to compensate the shortage of the income via the Fund in 5 or 7 years.

   The capital outflow from Russia due to the war conflict in Georgia and the oil prices drop encourages the decision-making on the investing of the NWF in favor of the internal market, as the economist of Merrill Lynch Julia Tseplyaeva considers. "We will be surprised, what size of the stake will be [the authorized Fund's facilities at Russia's market]". The capital outflow from Russia is taking place because of the political reasons rather than economic ones, since the economy is stable, and it means that political measures exactly should be taken – the government's support of the market foremost, as the president of the private pension fund "RESO Savings Fund" Andrey Neverov is convinced.

RTS (Russian Trading System) requires only $4 billion for its stabilization, and the main thing here is that the government will prove that it

is ready to provide the financial support, as the strategist of Alfa Bank Erik Depoi is convinced.

In 1997, China's National Fund backed the Hong Kong Stock Exchange because its index fell by 10,4%, as Mr. Depoi reminds.

   Russia's Ministry of Finance plans that the Fund will back the pension system: it will allocate annually the target transfer of 0,6% of GDP.

   In its financial strategy to 2023, the Ministry of Finance suggests to cut the volume of the reserve fund from 10% to 6% of GDP in order the NWF will get more.

According to the Finance Ministry's calculations, by the end of this year, it totals $100 billion against $32 billion in August.

   The new investment strategy is very aggressive, as the chairman of MDM Bank' s board Oleg Vyugin con

siders. However, it is only a sample version for the long-term investments: similar recommendations on the strategy of pension savings are worked out already in the USA for people, who are left 30 years before retirement.

   The risky management strategy of the Fund's facilities can be implemented within the 15-year period, as the government's official explained, and named Norway's sovereign fund that invests in Russia' s market a s well. The emerging markets are more volatile, but the Fund can wait until they recover and benefit from the growing quotations.

   The Fund's portfolio will not comprise "bad securities", since the criteria for the pension money are very strict in Russia, as Mrs.

Tseplyaeva is convinced. For instance, the private pension funds may keep up to 40% of stocks and to 40% of corporate bonds in the portfolio of pension savings (the facilities of the compulsory pension insurance), and up to 70% of stocks and to 70% of corporate bonds in the portfolio of pension reserves (the facilities of the voluntary pension insurance), and these are the highly rated securities, as Mr.

Neverov says. The private pension funds don't invest abroad, since they are forbidden to invest in the index funds and bonds of the EBRD (European Bank for Reconstruction and Development).

   The managing director of Bright Minds Capital Denis Rodionov fears that high inflation will influence on the revenues of the National Welfare Fund, and the corruption – on the placement, since the money can be directed to support some companies.

Investments in the western markets are amore safe, as Mr. Rodionov is convinced.