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. Last Updated: 07/27/2016

Pioneer-First Opens Doors For Mutual Funds in Russia

Russia' first licensed mutual fund officially opened for business Tuesday, signaling the race is on to lure Russians and their nest eggs into Western-style investments.


Phones were ringing busily at Pioneer-First unit investment fund's service office, but officials with Pioneer-First's management company, KUIF, were cautiously optimistic.


"We're live," said Timothy Frost, co-director at KUIF, adding that "some money" had been accepted Tuesday. But he wasn't able to say how much money or how many clients had signed on. "My hope is that we double the number of clients every day for a period of time ... but the worst thing that could happen for the industry would be an onslaught that people couldn't handle."


The fund will invest in government treasury bills, known as GKOs, which currently have annualized yields averaging 50 to 55 percent. Russian mutual funds are required by regulators to raise a minimum of 2.5 billion rubles ($400,000) in the first six months. According to Pioneer-First's prospectus, each investment unit costs 5,000 rubles, and the minimum investment is 500,000 rubles.


The profile of typical investors in Pioneer-First "would be Russians with monthly income of about 750,000 rubles," Frost said. "But the market will truly determine almost all those elements."


Pioneer-First's sales fee is 4.75 percent, management fees are 5 percent and the combined registrar, specialized depositor and auditor fee is 5 percent. Frost said some fees could be reduced for investments at certain yet-to-be-determined levels. Statements will be generated by Pioneer-First for every purchase or sale. Units in the fund currently can be purchased either directly from the management company or, starting over the next few days, via sales agents at four to five branches of Promradtekhbank and First Voucher Bank, with which Pioneer-First has distribution agreements.


Meanwhile, competitor Troika-Dialog Management is in the process of registering its fund prospectus; Credis (Moscow) AO hopes to launch its fund by December but will market exclusively through Credit Suisse Moscow.