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. Last Updated: 07/27/2016

Investors May Invest Abroad as Polls Near

Russian private investors are likely to diversify their portfolios and invest more abroad amid uncertainty ahead of the presidential election next year, a prominent Moscow fund manager said Wednesday.

"We will see a capital flight to offshore markets in the near future. Russia is a much more global place than official statistics show," said Ilkka Salonen, the president of the Renaissance Investment Management fund.

With the Kremlin's increased control over politics and media, the presidential poll is expected to become an easy ride for a Kremlin-backed candidate, provided there is unity within the government.

Salonen, whose fund has $4 billion under management, of which 80 percent is of Russian origin, said investors were disappointed with low returns on the local equity market this year.

The RTS index has fallen 5.6 percent to date this year.

"The Russian market has been so sexy that nobody wanted to go out. Now when the market is flat people start to look [for something else]," Salonen said.

Russia lifted restrictions on capital movements in 2006 and there are no formal limits on Russians buying shares overseas.

Salonen said the bulk of the money in his fund comes from wealthy individuals, corporations and private pension funds but that middle class private investors would also look for opportunities abroad. "Amid growing uncertainty small investors would also like to diversify their portfolios," Salonen said.

Salonen said the capital flight was unlikely to become a repetition of the 90's, when Russians took suitcases full of cash over the border or transferred billions of dollars to offshore firms through fake business deals.

"It does not mean Russians will abandon the local market, they simply want to shift part of their savings to other geographical areas," he said.