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. Last Updated: 07/27/2016

$8 Trillion Takes a Look, Leaves

Eight trillion dollars flew out of Russia on Thursday, after dining with Prime Minister Mikhail Kasyanov the night before.

The Russell 20-20 Association, which includes some of the world's largest asset managers and pension funds, had come to Moscow on a three-day investment exploration mission during which members sat down with top political and business leaders.

Of the more than $8 trillion managed by Russell 20-20 members, several hundred million is already invested here, including the $75 million managed by the Frank Russell Co., said Frank Russell chairman and CEO Michael Phillips, who is also Russell 20-20 chairman.

"I think [members] will come away happy and feeling they want to increase their holdings," Phillips said Wednesday. "I think there is real money involved. Probably there already has been. ... In previous 20-20 trips deals have been made."

The delegates were impressed by the country's economic performance and reform efforts, as well as the entrepreneurial spirit and vision of the politicians and business leaders they met with, Phillips said. "It made us extremely bullish over the long term."

Many of the participants have dramatically increased their investments here over the past year, said Russell 20-20 director Brian Davis. Investors have turned to Russia where assets are still undervalued despite market growth, especially as U.S. assets begin to look expensive and interest rates remain low.

Kasyanov offered the group mixed news: They missed getting in at the start, but the government is committed to reform, which should keep the economy chugging along. Significantly, Kasyanov noted that the government would require banks and corporations to move to international accounting standards within two years and would target single-digit inflation next year, said Richard Hainsworth, banking analyst at Renaissance Capital

"Kasyanov gave a good sales pitch without hype," Hainsworth said.

Nonetheless, Russell representatives expressed major concerns about ongoing problems with corporate governance, the lack of a strong banking sector and the structure of the stock market. A notable exception on Russell 20-20's agenda was a meeting with Igor Kostikov, chairman of the Federal Securities Commission, the stock market regulator.

However, just the fact that the association chose to visit Russia this year is a positive sign. The group's visit was originally scheduled for just after Sept. 11, but the association chose to combine the trip with the next stop, Poland, rather than cancel.

"It shows Russia is at the top of the list for international investors in terms of finding investment opportunities," said Neil Greer, head of international sales at Aton.

Of Russell 20-20's 47 members, 37 companies were represented on the trip by 90 delegates, the largest group on any trip so far, Phillips said.

"From interviews, investors have seen that there has been progress in Russia," said Teresita Heiser, director of EMPulse, which was founded by the Frank Russell Co. to prepare a report on investor perceptions sent to governments ahead of the group's visits. "The ratings have continually improved in the three times we've interviewed investors since 2000, and the trends right now are all generally positive."