By Gleb Bryanski and Toni Vorobyova
MOSCOW (Reuters) - Russia could invest up to half of its National Wealth Fund (NWF) in shares plus a further 30 percent in corporate bonds, including emerging market debt, Deputy Finance Minister Dmitry Pankin said on Monday.
"If the financial strategy will be adopted according to our proposal ... we can see that we have a substantial amount of money for 10 to 15 years to be invested in long-term instruments," Pankin said in an interview at the Reuters Russia Investment Summit.
"In that case, up to 40 to 50 percent could be invested in shares ... And a substantial proportion could be invested in corporate bonds, maybe 30 percent," he said at the event, held at the Reuters offices in Moscow.
State-owned wealth funds from China to Dubai, which globally manage almost $3 trillion in assets, have grabbed the attention of the world's financial markets this year. Russia is new to the game, having split off the NWF from its budget-cushioning reserve fund earlier this year.
The Finance Ministry must submit its proposals for NWF's investment strategy to the government by October 1. It has already suggested that the fund will contribute 0.6 percent of GDP per year to support the pension system.
Pankin said that over the long term, shares provided higher returns than government debt, and that income could further be boosted through geographical diversification.
"My feeling is that it could be possible to include not only G8 shares and G8 currencies, but a wider area, including emerging market equity and currencies," he said.
"If we have a portfolio with a huge variety of different instruments, it's possible to get the same level of risk ... with a higher return. It would be reasonable to include a high variety of different instruments, maybe derivatives, why not?"
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Pankin did not exclude the possibility of some of the fund being used for direct rather than portfolio investments, but said this would not be more than 5 percent of the total pot.
Some countries where global sovereign wealth funds invest, such as the United States, are worried that acquisitions by the often secretive funds could open key domestic companies to foreign control, and that they could destabilize international markets with their large-scale investments.
For Russia, soured relations with the West following its military conflict with Georgia could add an extra potential stumbling block to holding foreign companies. But Pankin said any political restrictions would be unlikely.
"It is reality that now the U.S. and European economies are very interested in attracting these SWFs ... My feeling is that it would be very difficult to introduce political restrictions," Pankin said.
"If the world had more economic links, more political links (then there would be) less political tension."
The NWF could grow to around $100 billion by year end, depending on the oil price, according to Pankin, from $31.9 billion at the start of this month. Continued...
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