Part of Fund To Be Invested Domestically

A "small amount" of the country's $32 billion National Welfare Fund, created to fund pensions, may be invested in local markets, said Alexei Ulyukayev, the Central Bank's first deputy chairman.

"A certain amount of funds from the National Welfare Fund can be invested in instruments on the Russian market, but this will be a comparatively small amount," Ulyukayev said at a banking conference in Sochi. That money will not be invested in local securities this year, he said.

The Finance Ministry is due to prepare by Oct. 1 proposals for investing about 40 percent of its oil funds less cautiously, in foreign shares and bonds. The Reserve Fund and National Welfare Fund are now invested in bonds, including those issued by 15 government-linked agencies from the United States, Britain, Germany, France, Austria, Canada and the Netherlands.

A total of 3.6 percent of the funds are invested in Fannie Mae and Freddie Mac bonds, Deputy Finance Minister Dmitry Pankin said Aug. 20.

More than $100 billion of the country's currency reserves were held in Fannie Mae, Freddie Mac and Federal Home Loan Banks bonds at the start of the year. In July, Ulyukayev said the Central Bank's holdings of Fannie Mae and Freddie Mac had been reduced to $50 billion, Interfax reported.

Since then, the bank has slightly reduced its investments in the three agencies' bonds, Ulyukayev said. "Now it's a little bit less," he told reporters.