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. Last Updated: 07/27/2016

Kostikov: Markets Safe for Pensioners

Federal Securities Commission chief Igor Kostikov on Tuesday declared the domestic market safe enough for pensioners.

The market has become less risky over the past 18 months, which saw a wave of bond and share issues, analysts said.

Russian companies issued almost $3 billion worth of bonds and shares domestically between April and June, Kostikov said. In the first quarter of 2002, companies issued more paper than in all of 2001, he added. The FSC could not provide exact numbers.

"We still don't have the whole picture," Kostikov said. "But [the whole market] is much bigger than it shows through exchange trading. The whole issuing, the primary issuing on the Russian market, was almost $3 billion."

"Issuance comes when the markets are healthy," said James Fenkner, chief strategist at Troika Dialog.

Kostikov said he would advise pensioners to invest, but in mutual funds rather than directly into the market. "It's the same story in America," he said.

Analysts said pensioners generally shouldn't be investing, but it would make sense for many average Russians to put money in a well-diversified fund, even one fully invested in Russia.

"Russia is a relatively risky market compared to the rest of the world," said Roland Nash, head of research at Renaissance Capital. But "if the alternative is holding money in dollars, then the risk-reward makes sense." Nearly 8 of every 10 rubles are held in dollars, he added.

The FSC is planning a nationwide tour to raise popular awareness of mutual funds.

"People have to realize the money won't be stolen, that the situation won't allow any more MMMs," Kostikov said, referring to the pyramid schemes that wiped out savings in the early 1990s.

The FSC also is working to expand the scope of mutual funds. The government last week accepted FSC regulations that would allow venture capital and real estate funds to be set up under the closed-mutual fund law.

"We know the market is waiting for this mechanism in order to channel Russian investors' money to industry," Kostikov said, adding that most estimates put Russian's cash hoard at $75 billion to $80 billion.

Only about $500 million had been invested in mutual funds as of June.

Much work remains for the FSC to make the market a safer place. Top priorities include the insider trading law, a draft of which has been submitted to the State Duma and will be read this fall.

A law on affiliated persons that would tighten existing legislation about related parties and force companies to be more transparent is not slated until next year, Kostikov said.