OREANDA-NEWS. The regulator simplifies the structure of investment fund market, as stipulated in Bank of Russia Ordinance No. 4129-U, dated 5 September 2016 ‘On the Composition and Structure of Assets of Joint-stock Investment Funds and Unit Investment Funds’.

In compliance with the Ordinance, all investment funds are to be split into five categories. Funds of two types will be eligible for non-qualified investors – funds of marketable financial instruments and real estate funds, while qualified investors will have a choice between funds of financial instruments, real estate funds and mixed funds.

The Ordinance renders ineffective FFMS Order No. 10-79/pz-n, dated 28 December 2010, ‘On Approving the Regulation on the Composition and Structure of Assets of Joint-stock investment Funds and Unit Investment Funds’, which provides for 16 categories of investment funds currently operational in the market.

The Ordinance expands the list of assets eligible for purchase by the fund.

Thereby, assets of the marketable financial instrument fund will mainly comprise assets eligible for organised trading, and money market instruments, including funds deposited with banks. Such a fund will be able to comprise investment units of open-end investment funds, rights of claim on agreements made for trust management of these assets. The fund may be replenished with assets eligible for trading in EEU, OECD and EU member-states and in China, India, Brazil and South Africa (at the exchanges included in the list set by the Bank of Russia), and with funds and deposits with banks of these countries, other assets related to trust management of the fund’s property.

The real estate fund for non-qualified investors may include commercial real estate, but only if 40% of premises are leased out and evaluated by an appraiser engaged in this activity for at least 10 years and having revenue of at least 100 million rubles in the past year.

Funds for qualified investors may include any assets.

The Ordinance establishes a requirement to the structure of assets of funds for non-qualified investors.

Thereby, to diversify the fund, investments in assets of one legal entity (other than a central counterparty) shall not exceed 15% of the fund’s assets.

The share of the fund’s assets recognised as liquid (money deposited with banks, high-rated bonds, equities included in calculation of stock indices of leading countries) shall exceed the historical value of outflows from the open-end unit investment fund calculated in compliance with the Ordinance, and shall not fall below 5%.

The Ordinance provides for convenient terms for market participants to adjust their operations to the new regulation. The transition period shall last for one year for open-end funds, three years for interval funds, and ten years for closed-end funds.

The document has been submitted to the Ministry of Justice of the Russian Federation for approval.