Tag: sovereign wealth fund

Russia To Use Pension Money To Aid Companies In Midst of Sanctions

Flag and map of Russia

Russia is planning to take billions from its pension fund and use the money to aid banks and other companies that have been targeted by Western sanctions.
From BusinessWeek:

During flush years of high oil prices and economic growth, Russia salted away more than $80 billion in a sovereign wealth fund to ensure the long-term health of the country’s pension system. Now the Kremlin is raiding the fund to bail out Russia Inc.

Russian companies and banks are lining up for aid as Western sanctions, capital flight, and the plummeting ruble curb their ability to invest and repay debt. Finance Minister Anton Siluanov told the Itar-TASS news agency last month that state-controlled oil giant Rosneft (ROSN:RM) and private gas company Novatek (NVTK:RM), both headed by close associates of President Vladimir Putin and hit by sanctions, could get as much as $4 billion apiece from the fund, whose current balance is $83 billion.

Although the exact amount of aid to the two companies hasn’t been confirmed, Vice Premier Arkady Dvorkovich said today that the government is ready to use the fund to support both public and privately owned energy companies. “The funds will be provided for a long term,” he told Itar-TASS.

Russia has diverted $30 billion from its pension fund since 2013 to plug holes in its general budget.

Russia’s Economy Minister indicated last month that taking money from the country’s pension fund to shield ailing companies from U.S. sanctions was a distinct possibility.

Major Pension Fund Backs London Mayor’s “Megafund” Idea

Boris Johnson

We covered yesterday the plan proposed by London Mayor Boris Johnson to merge the country’s 39,000 public sector pension plans into one scheme, which would invest in building and updating the UK’s roads, airports, railroads and other infrastructure.

Today, one of the UK’s largest pension funds has come out in support of the plan. From the Financial Times:

The £4.9bn London Pensions Fund Authority (LPFA) said it supported the London Mayor’s call for tens of thousands of public sector schemes to merge, with the money used for infrastructure investment.

[…]

“The overhead costs of running a large number of pension funds can run into billions of pounds,” said Edmund Truell, chairman of the LPFA.

“We have been trying to go direct with our investments and cut the layers of costs. I would consider it ‘job done’ if we were absorbed into a sovereign wealth fund.”

Pension investment advisers said it was far from perfect that so many small funds manage their investments individually but they would be concerned about the creation of one enormous fund.

“Many local authority funds are too small to be able to make individual investments in alternative assets or to have a bespoke liability-driven risk management strategy,” said Ros Altmann, a pensions expert.

“However, I would be concerned about too much concentration as well and would prefer to see a number of large funds, not just one or two.”

The Mayor originally proposed his plan in a weekend op-ed in the Telegraph, which can be read here.

 

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