Russia’s New SWF: National Welfare Fund

Alexei Kudrin

The Moscow Times reporting that “Russia has made much of its natural wealth, boasting some $157 billion accumulated in the stabilization fund from excess oil revenues. As of Friday, the stabilization fund will be split into the Reserve Fund and the National Welfare Fund.

Russian finance minister Alexei Kudrin reiterated the government’s commitment to investing some of that wealth into financial markets.

The official in Kudrin’s ministry who was until recently in charge of the stabilization fund, Deputy Finance Minister Sergei Storchak, remains in pre-trial detention on fraud and embezzlement charges. Investors have expressed concern over Storchak’s continued detention, seeing in the case a possible threat to Kudrin’s position and to his policy of using the Stabilization Fund to hedge against drastic falls in global demand for oil and gas.”

The National Welfare Fund will initially be invested very conservatively, with the following guidelines:

  • (i) All must be in foreign debt, denominated in USD, EUR or GBP, rated at least AA-, from Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Spain and the US.
  • (ii) At least 50% in foreign government debt, with the rest in foreign private/corporate debt.
  • (iii) Up to 30% in foreign agency debt and central bank debt.
  • (iv) Up to 15% in debt of international financial organizations (ADB, EIB, etc.).
  • (v) Up to 30% in foreign bank deposits.

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