Translation. Region: Russian Federal
Source: Central Bank of Russia –
An important disclaimer is at the bottom of this article.
The Bank of Russia has analyzed and summarized the accumulated law enforcement practice in the retail mutual investment fund (MIF) market, international experience, as well as initiatives of market participants, and proposes to discuss possible directions for the development of this segment.
One of the development vectors may be the expansion of investment opportunities for retail funds. It is proposed to increase the list of non-traded securities in which they can invest, but to set a limit. Digital financial assets may also appear in the list of objects available for mutual funds for investment. This will require creating a legal framework, as well as developing a procedure for separating and storing such assets. But retail funds will not be able to start investing in them immediately, but over time.
Market participants also proposed creating opportunities for the emergence of funds with increased financial leverage in Russia. These are borrowed funds or derivative financial instruments that the fund additionally uses to generate profit. Currently, the amount of financial leverage that a mutual fund for non-qualified investors can take on is limited to 20% of the fund's net asset value (with the possibility of deviation up to 40% as a result of market factors). The Bank of Russia believes that increasing the leverage entails increased risks and requires additional investor protection measures.
The idea of creating a fund of funds also requires a comprehensive assessment. Currently, in Russia, a management company cannot acquire investment units of one mutual fund under its management as part of the assets of another mutual fund under its management. However, in international practice, there are master-feeder fund structures – this is the name for a central fund consisting of assets collected from other funds under its management. The regulator proposes to discuss the prospects for using such structures in Russia, as well as the problems that they will help solve in the collective investment market.
In addition, the report considers proposals to speed up operations with units. Currently, the procedures for issuing, redeeming and exchanging investment units of open-end mutual funds, as a rule, take place within 1 to 4 business days from the moment the client provides all the necessary documents and makes the payment. It is proposed to consider the possibility of reducing this period so that operations are carried out in T 0 mode.
More about possible scenarios for the development of retail mutual fundsread in the report. Answers to questions presented in the material, comments and suggestions to it can be sent up to and including September 1.
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