The Performance of Investment Companies in Russia

Master in Finance & Banking
(2013/2014)
THE PERFORMANCE OF INVESTMENT COMPANIES IN RUSSIA
Chernovol Svetlana
Yalmanova Ekaterina
I
n
d
e
x
1
INTRODUCTION
...4
2 PERFORMANCE OF INVESTMENT
FUNDS .
.....7
2.1.
ROLE
OF
INVESTMENT
FUNDS
...7
2.2
HISTORY
COMPANIES
INVESTMENT
(IC)
..7
OF
2.3 THE MAIN TYPES OF INVESTMENT

COMPANIES
(IC):
...
.8
2.3.1 OPEN-END FUNDS (MUTUAL
FUNDS)
...8
2.3.2
CLOSED-END
FUNDS
........9
2.3.3
INTERVAL
FUNDS
(INF)
.......9
2.3.4 EXCHANGE-TRADED FUNDS
(ETFS)
......9
3
INVESTING
IN
RUSSIA
...10
3.1 REASONS WHY INVEST IN
RUSSIA
10
3.2 RUSSIA IN BLOOMBERGS BEST
COUNTRIES
FOR
BUSINESS
RANKING12
3.3 INVESTOR PERSPECTIVE ON
RUSSIA
...12
4
DEVELOPMENT
OF
INVESTMENT
FUNDS
IN
RUSSIA.
13
4.1 PERFORMANCE OF OPEN-END,
CLOSED-END AND INTERVAL
FUNDS....13
4.2 INTRODUCTION OF EXCHANGE
TRADED
FUNDS
(ETF)
IN
RUSSIA.23
4.2.1 BENEFITS AND RISKS OF A

RUSSIAN
ETF
...25
4.3 TAXATION OF INVESTMENT FUNDS
IN
RUSSIA
.26
THEORETICAL
BACKGROUND
.28
5.1
THE
HYPOTHESIS
EFFICIENT
MARKET
.28
5.2 THE CAPITAL ASSET PRICING
MODEL
....28
5.2.1
THE
JENSEN
ALPHA
..31
5.2.2 THE FAMA-FRENCH 3-FACTOR
MODEL
...31
5.3
THE
SHARPE
RATIO
..32
5.4
TREYNOR
RATIO
33
5.5
EXPECTED
RETURN
..34
5.6 VARIANCE AND STANDARD
DEVIATION
...34
5.7
BETA
..35
5.8
PORTFOLIO
MANAGEMENT
..3
5
3
PRACTICAL
BACKGROUND
..3
8
6.1
FINDING OUT
THE
BEST
INVESTMENT
FUNDS
...38
6.2
RECOMMENDATIONS
FOR
INVESTORS
47
7
CONCLUSIONS
..50
9
BIBLIOGRAPHY
..
.....51
9
ANNEX
..
...53
9.1
OPEN-END
BONDS
FUNDS
....53
9.2
OPEN-END
EQUITY
FUNDS
....54
9.3
INTERVAL
EQUITY
FUNDS
.....55
9.4
INTERVAL
BLEND
FUNDS
.....56
9.5
CLOSE-END
REIT
FUNDS
...57
9.6
TABLE
INDEX
MICEX
..58
9.7RISK-FREE
RUSSIA
10-YEAR
BOND
.59
1 Introduction
Economic growth is one of
the most important goals for the
country. Achievement of such goal
depends on attraction of surplus
funds for the further direction in
production or social spheres.
Investment fund is one of the
cooperative investment forms and it
is really attractive and available for a
private investor who is willing to
invest their money for short-term or
long-term period of time.
Investment funds appeared in
Europe at the end of XVII century
and became very popular in the
world in the middle of XX century.
In Russia first investment funds
were created only in 1996 and
developed very quickly. It must be
taken into account, that in recent
years investment funds in Russia
became one of the most important
sources for collective investment.
According to several rating
companies, nowadays Russia is an
attractive country for investment due
to several reasons. In 2013, Russia
joined
the
top-10
countries
considered the most important for
business development by the global
business leaders. The Russian
authorities consider improving the
investment climate to be a top
6
priority. The Government has set the

ambitious goal of raising the
countrys position in the World
Banks Doing Business ranking from
120th in 2011 to 20th by 2018. In
2014 Russia already takes 92nd
place. The countrys national debt is
minimal by international standards,
about 12% of GDP. Furthermore,
Russia became a fully-fledged
member of the WTO in July 2012.
The World Bank believes that WTO
accession will add 3.3% to the
countrys GDP for the next three
years and up to 11% by the next
decade.
In
Russia,
Investment
companies (IC) provide an excellent
opportunity for investment. IC
provide investment management and
bookkeeping services to investors
who do not have the time or
expertise to manage their own
portfolios. They are financial
intermediaries that receive funds
from individual investors and invest
those funds in a potentially wide
range of securities or other assets.
Integration of assets is the key idea
behind IC.
Each investor has a claim to
the portfolio introduced by the IC in
proportion to the amount invested.
These companies thus provide a
mechanism for small investors to
team up to obtain the benefits of
large-scale investing.
IC perform several important
functions for their investors:
1.
Record
keeping
and
administration. IC issue periodic
status reports, keeping track of
capital
gains
distributions,
dividends,
investments,
and
7
repayment, and they may reinvest

dividend and interest income for
shareholders.
2. Diversification and divisibility.
By pooling their money, IC enable
investors to hold fractional shares of
many different securities. They can
act as large investors even if any
individual shareholder cannot.
3. Professional management. Most,
but not all, IC have full-time staffs
of security analysts and portfolio
managers who attempt to achieve
superior investment results for their
investors.
4. Lower transaction costs. Because
they trade large blocks of securities,
IC can achieve substantial savings
on brokerage fees and commissions.
While all IC pool the assets
of individual investors, they also
need to divide claims to those assets
among those investors. Investors buy
shares in IC, and ownership is
proportional to the number of shares
purchased. The value of each share
is called the net asset value, or
NAV.Net asset value equals Market
value of assets minus liabilities/
Shares outstanding, see Bodie
(2005). There is a wide range of IC
that invest in different asset classes
and with different investment
objectives. IC can be actively
managed or passively managed
versus an index.
In this paper we will
investigate the conception, history
and types of investment funds and
characterize prospects for the
Russian financial market for
investors. We will examine different
types of funds and its performance
from 1996- 2014 using well known
8
investment performance measures as

Sharpe Ratio, Jensens Alpha and
Treynor Ratio.
For the empirical analysis we
will choose 20 investment funds
among a large variety of them. In
particular, we will focus on four
funds from each of the 5 following
big categories: open-end stocks,
open-end bonds, closed-end REIT
(real-estate
investment
trust),
interval stocks and interval blend.
Selection is based on popularity and
NAV. These 20 funds will be ranked
according to the average of the three
standard investment performance
mentioned above, and will allow us
to make recommendation for risky
as well as risk-averse investors.
The results of this research
may be used by financial consultants
and managers who are working with
clients of asset management
companies. Our recommendations
can help to asset management
companies to improve investment
funds management efficiency and be
also used as an excellent marketing
strategy. We also highlight the
interest that this project might have
for application in finance and
banking academic courses.
The reminder of the project
is organized as follows. Section 2
explains definition of investment
funds, different types of funds, role
and history of funds creation.
Section 3 describes briefly reasons
why Russia is a great country for
investment. Section 4 presents
development of Investment funds in
Russia. At that section you can find
funds
types
and
categories
description, growth dynamics of
9
assets management companies,

funds and NAV quantity, the
percentage of different funds
categories, and review of the
exchange trade funds (ETF)
performance in Russia. In Section 5
you can find theoretical background
for our calculation. Section 6
presents the main results of our
calculation, introduces the data and
recommendation for investors. And
finally, Section 7 gives the main
conclusion.
10
2PERFORMANC
E OF
INVESTMENT
FUNDS
2.1Role of Investment
Funds
The
growth
of
financial
intermediaries in developing and
transition countries is not surprising.
Market economies require private
savings to provide capital to
establish new ventures and to
expand existing enterprises.
Financial
intermediaries
allow small and medium-sized
investors to invest their savings in
the market. Such intermediaries may
offer investors the advantages of
financial expertise, economies of
scale for such items as market
research, portfolio management, and
trading activity, and the opportunity
to diversify and pool investments.
Robert (1975)
Diversification
enables
investors to reduce the risk inherent
in holding a small number of
11
investments without reducing the

expected return of the investment.
Pooling allows individuals to invest
in the more liquid assets of the
financial intermediary, while the
intermediary can invest in less liquid
and longer-term investments.
In addition to capital,
investment
funds
may
offer
privatized businesses management
expertise and expanded access to
capital
or
other
business
relationships. They may also serve
as a check on the actions of
managements and boards of
directors to ensure that they remain
accountable to the shareholders
Mark J. Roe (1994)
This monitoring function
may be especially important in
Eastern Europe, where mass
privatization schemes have resulted
in diffused ownership. Because of
the relatively small ownership stakes
distributed
in
privatization,
individual
shareholders
will
probably be unable to exercise
effective
control
over
the
management of enterprises.
2.2History of Investment
companies (IC)
The investment company concept
dates to the late 1700s in Europe,
according to K. Geert Rouwenhorst
in The Origins of Mutual Funds,
when a Dutch merchant and
brokerinvited subscriptions from
investors to form a trustto provide
an opportunity to diversify for small
investors with limited means.
(Rouwenhorst, 2008).
The
emergence
of
investment pooling in England in
the 1800s brought the concept closer
12
to U.S. shores. In 1868, the Foreign

and Colonial Government Trust
formed in London. This trust
resembled the U.S. fund model in
basic structure, providing the
investor of moderate means the same
advantages as the large capitalists by
spreading the investment over a
number of different stocks.
(Rouwenhorst, 2008).
Perhaps more importantly,
the British fund model established a
direct link with U.S. securities
markets, helping to finance the
development of the postCivil War
U.S. economy. The Scottish
American Investment Trust, formed
on February 1, 1873, by fund
pioneer Robert Fleming, invested in
the economic potential of the United
States, chiefly through American
railroad bonds. Many other trusts
followed that not only targeted
investment in America, but also led
to the introduction of the fund
investing concept on U.S. shores in
the late 1800s and early 1900s.
The first mutual, or openend, fund was introduced in Boston
in March 1924. The Massachusetts
Investors Trust introduced important
innovations to the investment
company concept by establishing a
simplified
capital
structure,
continuous offering of shares, the
ability to redeem shares rather than
hold them until dissolution of the
fund, and a set of clear investment
restrictions and policies.
The stock market crash of
1929 and the Great Depression that
13
followed hampered the growth of

pooled
investments
until
a
succession of landmark securities
laws, beginning with the Securities
Act of 1933 and concluding with the
Investment Company Act of 1940,
reinvigorated investor confidence.
Renewed investor confidence and
many innovations led to relatively
steady growth in industry assets and
number of accounts. (Rouwenhorst,
2008).
2.3The main types of

Investment companies (IC)
2.3.1 Open-end
(mutual funds)
funds
Open-end mutual funds must

be willing to buy back their shares
from their investors at the end of
every business day at the net asset
value computed that day. Most openend funds also sell shares to the
public every business day; these
shares are also priced at net asset
value. A professional investment
manager oversees the portfolio,
buying and selling securities as
appropriate. The total investment in
the fund will vary based on share
purchases, share redemptions and
fluctuation in market valuation.
There is no legal limit on the number
of shares that can be issued.
An open-end fund will issue
new shares, or repurchase old shares,
as needed to meet investor demand,
depending on whether money is
being added to the fund or shares are
14
being redeemed. The per share price

is determined by the net value of all
assets held by the fund, divided by
the number of shares.
Open-end funds are by far
the most popular among typical
investors. With an open-end fund,
you can participate in the markets
and have a great deal of flexibility
regarding how and when you
purchase shares. Also, you are never
required to purchase shares at a
premium.
2.3.2 Closed-end funds

Despite the name similarities, a
closed-end fund has little in common
with a conventional mutual fund,
which is technically known as an
open-end fund.
The
former
raises
a
prescribed amount of capital only
once through an IPO(Initial Public
Offering) by issuing a fixed number
of shares, which are purchased by
investors in the closed-end fund as
stock. Unlike regular stocks, closedend fund stock represents an interest
in a specialized portfolio of
securities that is actively managed
by an investment advisor and which
typically concentrates on a specific
industry, geographic market, or
sector. The stock prices of a closedend fund fluctuate according to
15
market forces (supply and demand)

as well as the changing values of the
securities in the fund's holdings.
So, a closed-end fund has a
fixed number of shares. You do not
purchase new shares from the fund;
instead, you purchase existing shares
from other investors. Shares are
typically traded on an open market
(stock exchange) where they sell at
either a premium or a discount,
depending on demand. Closed-end
funds are typically more volatile and
behave more like individual stocks.
2.3.3 Interval funds (INF)

An Interval Fund (INF) is a type
of closed-end fund that periodically
offers to buy back a portion of its
shares from the shareholders. INFs
differ from traditional closed-ended
funds in that their shares do not trade
on the secondary market, but are
subject to periodic (e.g., monthly,
quarterly or annually) repurchase
offers by the INF at a price based on
the Fund's net asset value (NAV)
at a specified date. In addition, INFs
are permitted to offer their shares
continuously at a price based on the
Fund's NAV.
Shares may be purchased at

NAV (net of sales charges).
Shareholder withdrawal from
an INF is affected through
periodic tender offers for the
funds' shares which are
affected at NAV.
Must charge the same level
of fees to all investors in a
fund.
Does not offer multiple
classes of shares.
16
2.3.4
Exchange-traded
funds (ETFs)
A security that tracks an index, a
commodity or a basket of assets like
an index fund, but trades like a stock
on an exchange. ETFs experience
price changes throughout the day as
they are bought and sold. Because it
trades like a stock, an ETF does not
have its net asset value (NAV)
calculated every day like a mutual
fund does.
By owning an ETF, you get
the diversification of an index fund
as well as the ability to sell short,
buy on margin and purchase as little
as one share. Another advantage is
that the expense ratios for most
ETFs are lower than those of the
average mutual fund. When buying
and selling ETFs, you have to pay
the same commission to your broker
that you had pay on any regular
order.
3 INVESTING IN
RUSSIA
3.1Reasons why invest in

Russia.
17
Russia is a vast country that

stretches from Europe to the Far
East. To the west, it borders Ukraine,
Belarus, Poland and the Baltic
states; to the north, Finland and
Norway; and to the south, Georgia,
Azerbaijan, Kazakhstan, Mongolia,
China and North Korea. Russia has a
coastline on three oceans: the Arctic,
the Atlantic and the Pacific.
As for foreign investment,
for the purposes of economic
modernization, it is worth noting
that in the Russian Federation there
was established in 2011 Direct
Investment Fund (RDIF). Russias
Ministry of Economic Development
acts as an investment ombudsman by
receiving complaints and helping to
resolve issues. Furthermore, Russia
has recently set up a business
ombudsman in order to protect the
rights of businesses when faced with
administrative
barriers
or
bureaucratic pressure.
The roadmaps focus on the
most vulnerable aspects of the
Russian investment climate and aim
to reduce administrative barriers,
improve customs and tax regulation,
protect investors rights, facilitate
state registration of legal entities and
the procedure of getting construction
permits, increase access to bank
loans and energy infrastructure, and
promote competition.
From 1996-2013 we can see
the following results in the Russian
Federation:
Russia is the worlds 6th
largest economy by GDP
(PPP).
Foreign direct investment
into Russia amounted to
$94bn in 2013 (increased by
83% YOY), which places
Russia 3rd in a global
ranking on FDI inflow after
USA and China.
18
Russia has one of the largest

domestic markets in the
world, ranking 8th among
148 countries.
Russia has one of the lowest
levels of public debt of any
major economy.
Russias middle class tripled
in the last 5 years.
GDP per capita (PPP) is the
largest
among
BRICS
countries.
Low unemployment rate of
5.5%.1
Therefore, according to the
United Nations Conference on Trade
and Development (UNCTAD), the
inflow of foreign direct investments
(FDI) in the Russian economy
increased 83 percent in 2013 yearon-year. Total level of FDI reached
US $94 billion as of the end of 2013.
These recently-published figures
confirm Russias appeal as market
worth investing. What is more,
international ratings agency Fitch
recently weighed in on Russias
credit outlook, confirming a positive
long-term foreign and national
currency issuer default rating (IDR)
of BBB with a Stable Outlook.
Russias senior unsecured foreign
and local currency bond ratings were
also affirmed at BBB.
So, Fitch cited key rating
drivers including:
Low government debt, at less
than 11 percent of GDP
Sovereign net foreign assets
of 23 percent of GDP
Increase of local currency
value of oil revenues in light
of ruble depreciation
The proposed transfer of $6
billion by the Russian
1 Data adapted from

https://www.pwc.ru/
19
government to the Reserve

Fund
Expected growth of 2 percent
in 2014, driven by private
consumption (Despite a
recent slowdown in Russias
GDP beyond expectations,
largely due to a decline in
investment, Fitch predicted
that these effects are likely
temporary)
Fitch also made recommendations
that could help boost Russias
ratings in the future, including:
reduction in vulnerability to oil price
shocks, either via fiscal reform or
gradual building of the Reserve
Fund as a buffer. Longer track
record of lower inflation
1200
1000
800
600
400
200
0
Figure 1. Growth of modern Russia

in numbers
According to the figure 1 we

see the following:
Russias GDP per capita almost
tripled since 1999 (1999- $ 6,790;
2013$
17,884).International
reserves of Russia increased more
2 Data adapted from
http://rdif.ru/Eng_Numbers/
20
than 40 TIMES (1999- $ 12 bn;

2013- $ 510 bn). Total value of
assets of Russian banking system
rose 30 TIMES (1999- $ 59 bn;
2013- $ 1,754 bn) Capitalization of
the Russian stock market grew
almost 20 TIMES (1999- $ 40 bn;
2013- $ 772 bn). Average nominal
monthly wage grew 15 times. $
(1999- $61; 2013-$940)
3.2 Russia in Bloombergs

Best Countries for
Business ranking
According to the Bloomberg
ranking, Russia has broken into the
top 50 in Bloombergs 2014 Best
Countries for Business rankings.
Russia jumped an impressive 13
spots from last year, mainly due to
WTO membership and improved
domestic consumption.
Russia succeeded in the
degree of economic integration
criterion, scoring 78 out of 100. This
takes into account membership in
the WTO, codependence with the
global market and the reach of
global market research. It also
performed well in the category
examining the cost of setting up a
business.
To rank the 50 best countries,
Bloomberg analyzed 157 countries
on six broad criteria. They were: the
degree of economic integration; the
cost of setting up a business; the cost
of labor and materials; the cost of
moving goods; less tangible costs
like inflation and the amount of
corruption; and the health of its
consumer base.
Russia placed 3rd among
BRICS countries and went from
56th to 44rd place beating India
(48th), but coming in behind Brazil
(38th) and China (28th).
21
3.3 Investor perspective

on Russia
According to the source Russian
Direct Investment Fund, over 70%
of investors who previously invested
in Russia are happy about their
decision.
82% of investors are
convinced that the large domestic
market,
developing
consumer
finance sector, growing levels of
savings and personal income present
attractive investment opportunities.
72% of investors positively
value the economic policy and
legislative changes introduced by the
Russian government to improve the
investment climate
84% of respondents noted
that joining the WTO had a
significant positive impact on the
Russian investment climate
22
4
Development
of Investment
funds in
Russia
4.1 Performance of openend,

closed-end
and
interval funds
In the United States, investment
companies are classified by the
Investment Company Act of 1940 as
either unit investment trusts or
managed investment companies. The
portfolios of unit investment trusts
are essentially fixed and thus are
called unmanaged. In contrast,
managed companies are so named
because
securities
in
their
investment portfolios continually are
bought and sold: The portfolios are
managed. Managed companies are
further classified as either closedend
or
open-end.
Open-end
companies are what we commonly
call mutual funds.
It is worth saying that in
Russian Federation the term an
23
investment company is not the

same thing that in the United States.
In Russia investment companies is
the same thing as investment bank in
USA. In Russia we use the term
Investment
funds
instead
of
Investments companies.
In Russian Federation funds
ruled
by
asset
management
companies.
Moreover,
asset
management companies is a trustee
of:
Funds assets of collective

investment
pension savings
mortgage pool
endowment of
noncommercial organization
insurance funds of insurance
company
Nowadays there are 3 types of

Investment funds:
Open-end fund- when every
working day it is obligatory
buy and sell shares
Interval fund- a fund that
combines the features of
open-ended and closedended schemes, making the
fund open for sale or
redemption
during
predetermined intervals. In
Russia at least annually.
Closed end fund- as a rule
does not buy back shares
before
funds
closing.
Investors may sell shares on
secondary offering and that
is not easy. The thing that
closed end fund was created
for special interests group.
And 15 categories of funds:
Stock fund- A stock fund or
equity fund is a fund that invests in
stocks
24
Bond fund- A bond fund or

debt fund is a fund that invests in
bonds, or other debt securities.
Blend fund-A mutual fund
whose assets are composed of a
combination of stocks, bonds, and
money market securities, rather than
just one or two of these asset classes.
This enables investors to diversify
their holdings with a single fund.
Since blend funds vary considerably
in composition is difficult to make
generalizations
about
their
performance or risk level, but
usually they are somewhat less risky
than stock mutual funds and
somewhat more risky than bond
funds or money market mutual
funds. also called hybrid funds.
A money market fund (also
known as money market mutual
fund)- is an open-ended mutual fund
that invests in short-term debt
securities such as commercial
papers.
An index fund (also index
tracker) -is a collective investment
scheme (usually a mutual fund or
exchange-traded fund) that aims to
replicate the movements of an index
of a specific financial market, or a
set of rules of ownership that are
held constant, regardless of market
conditions.
A "fund of funds" (FOF)
-is an investment strategy of holding
a portfolio of other investment funds
rather than investing directly in
stocks, bonds or other securities.
This type of investing is often
referred to as multi-manager
investment. A fund of funds may be
"fettered", meaning that it invests
only in funds managed by the same
investment
company,
or
"unfettered", meaning that it can
invest in external funds.
Commodity
fundinvestment fund which acquire
goods for the purpose of resale or
25
put up the capital in goods terminal

contract.
Hedge fund -is a pooled
investment vehicle administered by
a professional management firm, and
often structured as a limited
partnership,
limited
liability
company, or similar vehicle.
Mortgage funds- model is
to aggregate investor capital,
underwrite, originate and administer
a pool of mortgages, and pay the
interest out to investors net of fees
collected by the managers.
Art
treasures
fundinvesting in hand-made painting,
commemorative postage stamp,
engraving, ancient books, unique
musical instruments etc.
Venture capital fund- An investment
fund that manages money from
investors seeking private equity
stakes in startup and small- and
medium-size enterprises with strong
growth potential. These investments
are generally characterized as highrisk/high-return opportunities.
REIT - A real estate
investment trust (REIT)- is a
company that owns, and in most
cases, operates income-producing
real estate. REITs own many types
of commercial real estate, ranging
from office and apartment buildings
to warehouses, hospitals, shopping
centers, hotels and even timberlands
Private equity fund- A
private equity fund is a collective
investment scheme used for making
investments in various equity (and to
a lesser extent debt) securities
according to one of the investment
strategies associated with private
equity.
Rent fund- mutual fund
which underlying asset generates a
constant cash flow.
Credit fund- current tool for
organizing business credit, which
will not be burdened by the CBR
26
regulations,
taxes,
and
will
effectively replace the role of banks
in the already existing economic
schemes: leasing, car loans, and
collection business
In
1996
first
assets
management
companies
like
Pioglobal Asset Management , ABO
Capital, Pallada asset management,
Sberbank Asset Management were
subjects to licensing.
What is more in 1996 the
following first mutual funds were
established:
1.
Pallada bonds
funds
2.
Pallada stock
funds
3.
Sberbank
Ilya Muromets Bond Fund

We have chosen data from
the
League
of
Management
Companies of Russia from 2000 to
2014. The source the League of
Management Companies of Russia
contains the detailed information
about investment funds and asset
management companies in Russia
since 1996. Also we found out the
operational
information
about
shares prices and net asset value of
Russian investment funds. The
websie is www.nlu.ru.
Please, have a look at the
growth
dynamics
of
assets
management companies quantity in
Russian Federation figure 2. In the
graph you will find the information
abput asset management companies
from 1996 till our days.
The total amount of asset
management companies (AMC) is
blue line, AMC which have
investment funds is red one, and the
last green line is AMC which have
not investment funds.
27
600
500
400
300
200
100
Figure 2.Quantity of operating assets

management companies (AMC)
As consistent with above

mentioned data the main growth we
can see in 2000-2008. For that
period of time the quantity of asset
management companies increased
by 530. We can also see the decline
in the end of 2008. It is connected
with the beginning of Global
economic crisis.
From 2000-2003 there were
some assets management companies
which had not investment funds
under their control, because many of
assets
management
companies
wanted receive license to manage
non-governmental pension reserves.
In present time the quantity
of assets management companies is
407. It is worth mentioning that 327
companies out of 407 have
investment funds under control. In
present time we have more AMC
which are interested more in
investment funds management
28
neither pension funds management.

Partly it is connected with
population awareness and profit
improvement in Russia.
Consider the figure 3, here is
represented the time history of
funds quantity according to theirs
category, as: open-end fund, interval
fund, closed-end fund from 19962014.You can see in the graph 3
lines. Blue- open-end fund, redinterval fund, green-closed-end fund.
1000
900
800
700
600
500
400
300
200
100
0
Figure 3 .Quantity of
Investment Funds in Russia 19962014 3
According to the figure 3, in

2002 first closed-end funds were
introduced in the Russian market.
Thanks to the law about Investment
Funds and developed regulatory
3 Data adapted from the source
www.nlu.ru
29
structure of Federal Commission for

the Securities Market in Russia. The
first closed-end fund was Strategic
Investment
headed by asset
management
company
Management-Center
We can see on the figure 3
the fast growth of funds quantity
from 2005 to 2008, notably threefold
increase. Then we see the growth
tendency is reducing because of
Global economic crisis and the
quantity of interval funds from 2008
keep decreasing. It is worth saying
that only closed-end funds continue
their stable growth.
At the end of May 2014 there were
1397 investment funds in Russia.
Open-end fund-427
Closed-end fund-921
Interval fund-49
Examine the percentage of
different categories of open-end
funds at the end of May 2014, figure
4:
10%
7%
Stock funds
Bond
2% funds
Blend funds
Money market funds

40%
22%
Funds of funds
19%
30
Inde
Figure 4. Percentage of Open-end

Funds in 2014 4
Among the open end funds

in the figure 4, the Stock Funds have
the highest percentage 40%, then
Blend and Bond Funds with 22 and
19 % respectively.
As for interval funds, which
you can see in the figure 5, the first
place get the Stock fund with 37%
so the Blend funds have less for 4%
comparatively with Stock Fund.
Then follow Commodity and Hedge
Funds and Funds of Fund complete
the circle with 2 %
12%
Stock funds
Bond funds
Blend funds
37%
16%
Money market funds
Index funds
2%
Commodity funds
Hedge funds
33%
Figure 5.Percentage of
Interval Funds in 20145
Here you can see the Closed-end

funds, notably the figure 6.
www.nlu.ru
www.nlu.ru
31
Funds of fun
As you can see in the figure

6, more than a half of funds
quantity is real-estate or REIT
(61%). Real-state fund can be
created from 3 to 15 years (like all
real estate funds) with the possibility
of prolongation.
The REIT can be formed
with the help of the following
means:
cash assets- shareholder

invest their money in a realestate fund
real-estate-shareholder invest
their money in items of
immovable property
different assets-shareholders
invest in cash, items of
immovable
property,
securities
Then in the figure 6 there

are: Private equity Funds, Rent
funds, Credit funds and Venture
capital funds, they are on their
decrease from 9 to 6 %.
3%
7% funds 3%
Bond
2%
Stock funds
8%
Money market funds
Blend funds
6%
Index funds
Funds of funds
Commodity funds
Hedge funds
Mortgage fund
Art treasures funds
Venture capital funds
REIT
Private equity funds
Rent funds61%
Credit funds
9%
32
Figure 6.Percentage of Closed-end

Funds in 2014 6
More
detailed
quantity
information you can see in the table
1, where you can see the funds
category and also information about
funds quantity with reference to
different types of funds. Not all
categories are presented in each type
of fund.
Category
Stock funds
Bond funds
Blend funds
Money market funds
Index funds
Funds of funds
Commodity funds
Hedge funds
Mortgage funds
Art treasures funds
Venture capital funds
REIT
Private equity funds
Rent funds
Credit funds
Total:
Table 1. Funds quantity
according to their categories

www.nlu.ru
33
Open-end
funds
172
79
94
9
30
43
Interval funds
Clos
fu
18
0
16
0
0
1
8
6
427
49
600,000,000,000
500,000,000,000
400,000,000,000
300,000,000,000
200,000,000,000
100,000,000,000
0
Interval Funds
Open-end Funds
Figure 7. Comparison of Quantity to

NAV.7
We
want
to
present
Comparison of Quantity to NAV
figure 7.
In the 7 figure we can
observe 3 types of funds and the
funds dynamic:
Interval funds-red colour
Open-end fund-blue colour
Close-end fund-green colour
In the context of mutual
funds,
while
all
investment
companies pool the assets of
individual investors, they also need
to divide claims to those assets
among those investors. Investors buy
shares in investment companies, and
ownership is proportional to the
number of shares purchased. The
value of each share is called the net
asset value, or NAV. Net asset value
equals assets minus liabilities
expressed on a per-share basis. The
formula of NAV: Market value of
www.nlu.ru
34
Close-end Funds
assets
liabilities/shares
outstanding.
All mutual funds' buy and
sell orders are processed at the NAV
of the trade date. However, investors
must wait until the following day to
get the trade price.
Mutual funds pay out
virtually all of their income and
capital gains. As a result, changes in
NAV are not the best gauge of
mutual fund performance, which is
best measured by annual total return.
The best performance we can
see in the figure 7 in 2007, NAV was
766,5 billion of rubles.
At the same time in 2008 we
observe the sharp decrease linked to
financial crisis and NAV is 540
billion of rubles.
In 2009 we see the
continuing funds decreasing and
only in the beginning of 2013 we see
the same rate that was in 2008. As
we have mentioned earlier in the
figure 1, that was connected with the
Russian economic state at that
period of time.
According to present data
NAV of Open-end Fund is 97 billion
of rubles, Intervals NAV is 6,5
billion of rubles and close-end
funds NAV is 471 billion of rubles.
We did not include Credit
funds, Private equity funds, Venture
capital funds, Hedge funds because
according to Russian legislation it is
forbidden
the
disclosure
of
information of these funds. These
funds can use only by qualified
investor.
Have a look on the analysis
according NAVs different funds
categories. We are going to preset 3
figures according to NAV in
different types of investment funds.
35
100%
5,392,476,544
2,473,557,022
2,451,429,276
7,859,844,431
43
90%
30
9
80%
70%
94
Funds of funds
60%
Index funds
Money market funds

48,842,488,888
50%
79
40%
30%
Bond
20%
funds
Stock funds
172
30,131,239,159
10%
0%
Quantity
Figure 8.Comparison of
Quantity to NAV. Open-end Funds8
According to the figure 8 we

can observe the following:
On the left side there are
funds quantities, whereas on the
right side there are NAV funds
quantities. All 6 funds have their
own colours:
Funds of funds-orange colour
Index funds-light blue colour
Money market fund-purple colour
Blend funds-green colour
Bind funds-red color
Stock fund-blur colour
So, for open-end funds we
see that the largest NAV represent
Bond funds 48,8 billion for 79
funds and Stock funds 30,1 billion
for 172 funds. Blend funds in openend have 7,8 billion of ruble of 94
funds of NAV but it is worth saying
that in interval funds the Blend
Funds have 3 billion of 16 funds.

www.nlu.ru
36
NAV
100%
90%
80%
895,343,960
4,790,164
70%
60%
3,001,589,333
16
50%
40%
Commodity funds
Funds of funds
Blend funds
Sto
30%
20%
18
2,667,305,708
10%
0%
Quantity
Figure 9.Comparison of Quantity to

NAV. Interval Funds 9
Also taking into account the

interval funds, as we can see in the
figure 9. There are 4 types of funds:
Commodity funds-purple colour
Funds of funds-green colour
Blend funds-red colour
Stock funds-blue colour
Funds
and
NAVs
quantities.
The Stock Funds with 2,6
billion of NAV for 18 funds,
Commodity funds have 2,6 billion of
ruble for their 8 funds.

www.nlu.ru
37
NAV
100%
78
90%
80%
189,234,748,577
70%
Rent funds
REIT
Art treasures funds
Mor
60%
50%
559
164,895,568,169
40%
30%
Money market funds

20%
10%
0%
Blend funds
Stock funds
1,872,145,712
73,080,934,079
5
30
29
41,742,201,173
Quantity
NAV
Figure 10.Comparison of
Quantity to NAV. Closed-end Funds 10
In the figure 10, there are 7

funds designated with different
colours and also information like in
the previous figures about funds
quantity and NAV.
The highest NAV belong to
Rent funds 189 billion for 78 funds
in close-end funds (figure 10) .And
real-estate investment trust (REIT)
has the smallest NAV for big number
of funds. 164 billion for 559 funds.
4.2 Introduction of
exchange traded
funds (ETF) in Russia
We have examined 3 types of
investment finds in Russia, notably
from 1996 till our days. We also
want to say that Russian market is in
progress as we have mentioned
above. And now in Russia we can
see more and more funds. It is worth
10 Data adapted from the
source www.nlu.ru
38
saying that until quite recently the

exchange traded funds - ETF were
not available in Russia. First ETF
appeared on Moscow Exchange in
April 2013.
ETF is an acronym for
Exchange-Traded Funds, investment
vehicles traded in stock exchanges in
the manner similar to stocks. The
funds are made up a similarly
themed stocks and bonds. They are
traded at the net asset value of its
underlying assets. While they have
many stock-like features, they are
cheaper and more tax-efficient than
stocks.
ETFs funds:
1. FinEx Tradable Russian
Corporate Bonds UCITS
ETF (RUB) -FXRB
2. FinEx Tradable Russian
Corporate Bonds UCITS
ETF (USD)-FXRU
3. FinEx Physically Held Gold
ETF (USD)-FXGD
4. FinEx
MSCI
Germany
UCITS ETF (EUR)-FXDE
5. FinEx
MSCI
USA
Information
Technology
UCITS ETF (USD)-FXIT
6. FinEx MSCI Japan UCITS
ETF (USD)-FXJP
7. FinEx
MSCI
Australia
UCITS ETF (USD)-FXAU
8. FinEx MSCI USA UCITS
ETF (USD)-FXUS
9. FinEx
MSCI
United
Kingdom
UCITS
ETF
(GBP)-FXUK
10. FinEx MSCI China UCITS
ETF (USD)-FXCN
11. FinEx
CASH
EQUIVALENTS
UCITS
ETF (RUB Hedged Shares)FXMM
Talking about FinEx we can that that
it is the first ever locally listed
exchange-traded fund (ETF) on
Moscow Exchange
39
Basic Information:
Asset class- Fixed Income
Product
type-Retail
&
Institutional
Inception date-07/05/2014
Fund base currency-USD
Reporting
frequencyMonthly
Hedged currency-RUB
Minimum purchase-1 share
Fund domicile-Ireland
Risk Information
Annual volatility-0.39%
Tracking error-0.49%
FinEx has launched Russias
first ever locally listed exchangetraded fund (ETF), the FinEx
Tradable Russian Corporate Bonds
UCITS ETF (FXRB). The fund has
been listed on the Moscow
Exchange in April 2013 and
provides exposure to shorter
maturity liquid Eurobonds issued by
Russian non-sovereign
issuers.
Buying and selling FinEx ETFs is
very simple. They trade and settle
just like ordinary shares throughout
the trading day. FinEx ETFs are
currently listed on the Irish Stock
Exchange (ISE) and admitted to
trading on the London Stock
Exchange (LSE) (settling through
Crest and Euroclear), and Moscow
Exchange (settling through NSD).
The fund is linked to the
Barclays EM Tradable Russian
Corporate Bond Index. Securities
issued by domestic Russian quasisovereign and corporates are eligible
for the index, with a maximum of
three bonds per issuer. Issuer caps
and floors are applied to enhance
diversification. Duration of the
bonds ranges from 18 months to five
years
Alexander
Afanasiev,
Chairman of the Executive Board
and CEO, Moscow Exchange, said:
The entrance of the first ETF on to
40
the Moscow Exchange signals an

important step in the development of
financial infrastructure in Russia.
The launch of this type of global
product
contributes
to
the
establishment of Moscow as an
international
financial
centre.
Russia's stock markets may soon see
a revaluation upward. Russia may
have been changing for the better, at
least economically. This looks set to
change, with significant growth
expected in emerging markets such
as Russia.
The world market of ETF
expects the growth in the nearest
future. According to European
investors investigations, 50% of
respondents consider that financial
reforms in Russia and situations
improvement will cause beneficial
effect on the Russian economy.
Here you can see the
additional funds information:
NAV-(on 2014-06-12) -980.647
Assets (M)- (on 2014-06-12)198.1889
Shares out (M)- 0.20
Market Cap (M) -201.15
% Premium-1.55
Average 52-Week % Premium1.0332
Dividends for FXRB
Dividend Type- Income
Dividend Frequency-Semi-An
Last Dividend Net-(on 2014-03-31)
50.710
Dividend Yield (ttm)- 10.19%
On the Figure 11 you can
see the performance for FinEx,
Tradable Russian Corporate Bonds
UCITS ETF (RUB) FXRB for 1
year you can see the graph which
represents the changing of ETF price
for 1 year.
41
Figure 11. Performance for FinEx for

1 year11
4.2.1 Benefits and Risks of

a Russian ETF
Russian ETFs have been on the rise
in recent years, thanks in no small
part to the country's strong metal,
mining and telecommunications
sectors. Even in the wake of the
global recession, they fared better
than stocks and many other
investment options. But they are not
investments that anyone should enter
into lightly and are typically more
expensive than other ETFs.
Investors should keep in
mind that they do carry serious risks
that can cause significant losses if
anything goes wrong. This is why
anyone who wishes to invest in
Russian exchange-traded funds will
need to carefully consider whether
or not the benefits outweigh the
risks.
Russia is the largest country
in the world that contains a
significant amount of oil and metal
deposits. Since the early 2000s, the
11 Data adapted from
http://www.bloomberg.com/quot
e/FXRB:RM
42
Russian government has been eager

to benefit from the country's mineral
and fossil fuel deposits.
The Russian governmental
efforts have proven to be remarkably
successful, stimulating Russian
economy and inspiring significant
development, particularly in major
cities. Even today, Russia remains
one of the world's largest oil
suppliers, and mining continues to
generate significant profits.
Much of Russia's Asian
territories still have not been
adequately explored, but geological
studies suggest that there are many
untapped oil and mineral deposits
waiting to be unearthed which
ensures that Russian ETFs will
remain profitable in the near future.
Similarly,
the
Russian
telecommunication industry has seen
a robust growth.
Although mobile phone
technology entered the country in
the 1990s, it was not until 2000s that
it became widespread. Foreign and
domestic cell phone networks
continue to grow and thrive. So far,
much of that growth has been
confined to major cities and their
immediate suburbs, but the enormity
of Russia ensures that there is still be
plenty of room to grow for many
decades.
Just
like
any
other
investment, Russian ETFs carry
many risks as well. In spite of a
series of recent government reforms,
the nation is still suffering from
pervasive corruption. Independent
researchers estimate that Russian
citizens and corporate entities spend
millions on bribes every year. The
corruption continues to affect
Russia's justice system and law
enforcement in general. It makes it
harder for investors to protect
themselves
from
fraud,
and
companies those stocks make up the
43
ETFs are more vulnerable to failure

than their Western counterparts.
The
government's
relationship
with
Russian
companies, particularly the ones
involved in the energy sector,
continue to cause concern. Over the
past few years, the government has
demonstrated its willingness to take
over successful companies. The
circumstances behind these mergers
remain controversial. Many longtime investors in Russian assets
continue to worry about the longterm viability of their investments.
4.3 Taxation of Investment

Funds in Russia
Basic decisions made in designing
the overall tax system for individuals
and enterprises frame the design of a
tax regime for investment funds.
Decisions are required on such
questions as how to tax dividends
and interest received by individuals
and enterprises, whether to integrate
the individual and enterprise tax
regimes, how to tax capital gains and
losses, how to tax foreign source
income, and whether and how to
adjust for inflation
Countries differ in their
approaches to regulating the
formation of investment funds.
According to the KPMG -is a
global network of professional firms
providing Audit, Tax and Advisory
services, in Russia the profits of
joint stock funds are taxable at the
general rate of 20 percent.
Interest income on state
securities is subject to a 15 percent
tax. However with respect to state
securities issued before 21 January
1997 and in certain other cases,
interest income is subject to taxation
at the rate of 0 percent. Dividends
receivable by a Russian legal entity
44
are subject to profits taxation at a

rate not exceeding 9 percent.
Under applicable Russian
legislation, investment funds may
distribute dividends which are
subject to profits withholding tax at
the source of payment at the rate not
exceeding 9 percent with respect to
recipients who are Russian residents
and 15 percent with respect to
recipients who are foreign residents,
i.e. the investment fund should
withhold and subsequently transfer
the above tax to the budget.
Dividends are distributed
from the retained earnings of the
investment fund, for example. They
are non-deductible for profits tax
purposes.
There are no special tax
incentives for investment funds in
the Russian Federation.
Joint stock funds are subject
to property tax at the rate not
exceeding 2.2 percent.
In general, transactions with
securities, including investment
units, are not subject to value-added
tax (VAT). However, the amounts of
fees paid to a management company,
specialized custodian, and auditor
are subject to VAT in accordance
with the general rules.
45
5 THEORETICAL
BACKGROUND
5.1 The Efficient market

hypothesis
One issue closely related to mutual
fund performance evaluation is the
employment of the past information
set in predicting the performance in
the future. Therefore, the funds
studies are partly tests of the stock
market efficiency. In the classic
article, Fama (1970) suggests that on
an efficient market at any given
time, all securities fully reflect all
available information.
More specifically, he states
that it is not consistently possible to
beat the market by using the
information that is already known.
Therefore, when the prices fully
contain all the information, they
only change in response to new
information,
which
must
be
something unpredictable.
This makes securities prices
to move unpredictably. In finance
this movement is often referred to as
random walk process Bodie (2005).
Fama (1970) subdivides the efficient
market hypothesis into three
categories, each of them dealing
with a different type of information.
In the first category security prices
reflect all the information contained
in the record of past security prices.
46
This is called weak form of market

efficiency. If a market meets the
weak form criteria, it is not possible
to make superior profits by studying
the
past
returns.
Moreover,
according to the weak form criteria
it should not be possible to use e.g.
historical fund returns to predict the
fund performance in the future and
make superior profits.
The
second
form
of
efficiency states that security prices
reflect both the past information and
all the other published information.
This form is better known as the
semi-strong
form
of
market
efficiency. If markets meet the semi
strong criteria, then the prices will
immediately adjust for public
announcements
such
as
the
announcement of the last quarters
earnings.
Finally, the third form of
market efficiency is called strong
form efficiency. This means that the
prices reflect both public and private
information of the certain security.
Therefore,
not
even
insider
information could be used to gain
superior profits.
5.2 The Capital

Pricing Model
Asset
The Capital Asset Pricing Model

(CAPM), which is the standard form
of the general relationship for asset
return and risk was developed
independently by Sharpe (1964),
Lintner (1965) and Mossin (1966).
All three authors make a similar
conclusion about the equilibrium
model
that
determines
the
relationship between the expected
return and risk for any asset. The
basic idea behind the CAPM is that
the expected returns on securities are
a positive linear function of their
market risk. The model can be given
as follows:
47
E ( ri )=rf + i [ E ( rm )rf ]
where E(ri)is the expected
return for asset i, rf is the return of
the risk-free asset, i stands for the
beta coefficient for security i and
E(rm) is the expected return for the
market portfolio.
The risk-free asset is
considered as a certain return.
Therefore, this type of asset must be
some kind of fixed income security
with no possibility of default.
Generally accepted proxy for the
risk-free asset is Treasury security
with a maturity that matches the
length of the investors holding
period. Sharpe (1999)
The
beta
coefficient
measures the securitys sensitiveness
to the changes in return of the
market portfolio. It assumes that any
additional variables such as price
ratio or the firm size do not have an
effect on expected excess return.
Therefore, it is the index of
systematic risk. The higher the beta
is for any security, the higher the
equilibrium returns is expected to
be. On the other hand, higher beta
coefficient would mean higher
losses when the market is going
down. The beta coefficient can be
calculated as follows .Elton (2003)
cov (ri , rm)
i=
var (rm)
where cov (ri,rm) is the
covariance of market return and
return on investment and var (rm) is
the variance of market return.
When it comes to the market
portfolio, Sharpe (1999) suggest that
it does not only consists of common
stocks but also of other kind of
investments such as real estate,
bonds
and
preferred
stocks.
However, generally investors restrict
the market portfolio to just common
stocks.
Actually, the definition of the
true market portfolio has been a
48
controversial topic among academics

for years. For example, Roll (1977)
argues that the true market portfolio
is difficult to determine. According
to him, this means that therefore it is
not possible to test the Capital Asset
Pricing
Model. Furthermore, Roll
(1977) claims that the employment
of different proxies for the market
portfolio
may
cause
some
measurement errors. For example,
different proxies, even if their
returns are highly correlated, may
lead to different beta estimates for
the same security. The Capital Asset
Pricing Model has also been
criticized that it reduces the situation
to very extreme case. Even if the
model explains the behavior of
security returns, it does not
necessarily explain the behavior of
individual investors. For example,
investors may analyze and process
the information in a different way
and therefore they might have
different
expectations
about
securities future performance. Elton
(2003)
However,
despite
the
criticism directed to the CAPM it is
widely used in finance. Obviously, it
describes the reality in a quite
reliable way. Another reason for its
employment is its mathematical
simplicity. Therefore, the CAPM is
generally used e.g. in project and
portfolio evaluations, in a firms
capital
budgeting,
portfolio
construction and even measuring the
effect of policy change on risk. Chen
(2003)
49
5.2.1 The Jensen Alpha

Based highly on the Capital Asset
Pricing Model, Jensen (1968)
derives a measure for portfolio
performance called Jensen alpha. It
measures the average return on the
portfolio over and above that
predicted by CAPM.
The Jensen alpha can be
given as follows:
rprf =p+ p(rmrf )
where rp return for portfolio
p, p is the Jensen Alpha of portfolio
p, rf is return of the risk-free asset,
rm is the return for the market
portfolio and p is the beta
coefficient for portfolio p.
The Jensen alpha can be
interpreted so that if the p is
positive the portfolio has performed
better than the CAPM has predicted.
Moreover, the higher the alpha the
better performance the portfolio has
obtained. On the other hand if the p
is below zero it indicates that the
portfolio
has
underperformed
compared with predicted by the
Capital Asset Pricing Model. Jensen
(1969) suggests that the alpha
measures the forecasting ability of a
fund manager. Therefore, if the
manager has the ability to forecast
security prices (or perhaps some
insider information not available to
others) it should lead to a positive
abnormal return compared with
CAPM. To clarify this more, the
Jensen alpha can also be graphically
described. It can be demonstrated as
the vertical distance of the
investments characteristic line from
the origin where market excess
return is presented on the horizontal
axis and excess return on investment
is on vertical axis.
50
Figure 10 gives an example

of three portfolios characteristic
lines. Clearly, each portfolio has an
equal beta coefficient. On the other
hand,
their
intercepts
differ.
Portfolio B has an intercept of zero,
but the intercepts of the portfolios A
and C are different from zero. This
means that these portfolios have
earned abnormal return different
from what was predicted by CAPM.
Obviously, the portfolio A has a
positive abnormal return when the
abnormal return on the portfolio C is
negative.
Figure 10. The Jensen Alpha in the ri,

rm-space
Figure 10 displays the

interpretation of the Jensen Alpha.
On the horizontal axis is presented
the market return (rmt) and on the
vertical axis is presented the return
on the investment (rit). A, B and C
describe different portfolios.
If p and p are assumed to
be constant over the evaluation
period, they can easily be estimated
using the simple linear regression.
Therefore, this equation can be
presented as follows .Sharpe (1999):
rmt
rft)+
rptrft =p +
pt
51
where rpt is return for

portfolio pat time t, p is the Jensen
Alpha of portfolio p, rft means the
return of the risk-free asset at time t,
rmt is the return for the market
portfolio at time t, p is the beta
coefficient for portfolio p and pt is
the error term of portfolio pat time t.
5.2.2 The Fama-French 3factor model

The Capital Asset Pricing Model
assumes that only one risk factor
affects the expected return. This is
the covariance between the return on
security and the return on the market
portfolio i.e. the beta coefficient
Cuthbertson (2000).
However, the employment
and development of multi-factor
models in the security selection, in
the investment management and in
the
evaluation
of
portfolio
performance has grown rapidly.
These multi-factor models have
become popular since empirical
results have suggested that there are
more factors that may affect the
expected asset returns than just one,
like the CAPM assumes. Elton
(2003)
In developing one of the
most popular multi-factor model,
Fama and French (1992) try to
identify additional factors that might
explain stock returns. Using data
from the US equity market, they test
the joint roles of market , size, E/P,
leverage and book-to-market equity
in the cross section of average stock
returns.
Their main findings indicate
that relation between average returns
and the is not strong. However,
used alone, size, book-to-market
equity, E/P and leverage implicate
strong relation with the cross-section
of average stock returns. Moreover,
Fama and French (1993) further
52
extend and develop their previous

study.
They e.g. use time-series
regressions to study asset pricing
and form portfolios to mimic the risk
factors related to size and book-tomarket equity. Based on the results
they conclude that three factors are
for the most part able to capture
strong variation in returns, no matter
what other factors are used in the
same regression12
These factors are:
1. The excess return on a
market portfolio. (rm-rf)
2. The difference between
the return on a small stock portfolio
and the return on a large stock
portfolio. (SMB)
3. The difference between
the return on a high book-to-market
stock portfolio and the return on a
low
book-to-market
portfolio.
(HML)
Finally, generalized in the
equation form the three-factor model
suggested by Fama and French
(1993), which expands the Capital
Asset Pricing model, can be given as
follows:
E ( r i ) r f =b i [ E ( r m )r f ] + si E ( SMB ) +hi
E (HML)
where E(rm)-rf , E(SMB)
and E(HML)denote the expected
premiums for each factor described
before. The bi, si and hi in the
equation 5 measure the sensitivity of
each factor (i.e. factor beta or factor
loading) in the expected return and
they can be estimated through time
series regression as follows:
r ir f = i+ i ( r mr f ) + si SMB +hi HML+ i
12 As e.g. Prigent (2007, 150)
points out, it is worthwhile to
note that the Fama-French
model assumes that the market
is efficient, but more than one
factor is needed to explain
asset returns.
53
On the other hand, the

intercept of the previous regression
i.e. i can be also interpreted as a
performance measure. However,
following this approach, it is
possible to capture excess returns
generated by tactical asset allocation
strategies that try to exploit
inconsistencies of the Capital Asset
Pricing Model.
To be more specific, fund
excess returns are decomposed into
three components; excess market
returns, returns generated based on
well known strategies of buying
small-cap stocks and selling largecap stocks (SMB), and finally
returns generated by buying stocks
with high book-to-market ratios and
selling stocks with low book-to
market ratios (HML).
Therefore, the intercept the
formula represents the value that the
manager has added to the portfolio
over and above what could be
justified by market risk and
generated by these known strategies.
Hence, at least in theory,
statistically significant positive alpha
would implicate some managerial
skill. Babalos ( 2007)
5.3 The Sharpe ratio

The Sharpe Ratio developed by
William Sharpe (1966) is one of the
most commonly used performance
measures due to its simplicity13. The
ratio is calculated by dividing the
excess return on the portfolio by the
standard deviation of the return.14
Therefore, it takes a different
approach
to
performance
13 In addition to discussion of
the ratio, Sharpe (1994)
provides broader range of the
applications for the original
measure.
54
measurement than the two previous

models. Mathematically the Sharpe
ratio can be given as follows:
rprf
S=
p
where rp is the return for the
portfolio p, rf is the return of the
risk-free asset and p describes the
standard deviation of the returns of
portfolio p. Respectively, the
standard deviation p of the
portfolio p needed in the previous
formula can be given as follows:

n1
where r it is the return of
portfolio pat time t, pr is the mean
return of portfolio p and n is the total
number of observations.
Investors can interpret the
Sharpe ratio to denote, how much
excess return they are receiving for
the extra volatility they take for
holding a riskier asset. To be more
specific, the Sharpe ratio shows
investors, if the return on portfolio is
due to smart investment decisions or
due to extra risk.
According to Sharpe (1966),
fund performance might vary in two
respects. Firstly, funds might exhibit
different variability in returns due to
selection of different degrees of risk
or due to erroneous prediction of the
risk related to particular portfolio.
Secondly, funds with similar risks
might show variability in returns due
to inability of some managers to
select underpriced securities or to
diversify properly their holdings.
Hence, the Sharpe ratio measures
also the managerial skill.
When comparing e.g. two
different funds one can be seen as a
14 Existing literature suggests
alternative names for the
Sharpe ratio like the Sharpe
index, the Sharpe measure and
reward-to-variability ratio.
55
good investment if these higher

returns are not due to too much
additional risk. Therefore, investors
are often advised to pick portfolios
with high ratios.
When using the Sharpe ratio
it is reasonable to note that standard
deviation measures the total risk of
the investment and therefore
including also the unsystematic risk.
However, because the risk is
measured this way, the Sharpe ratio
is independent from the asset pricing
models such as the CAPM. It does
not take into account e.g. the
correlation structure of the returns
with the investors other holdings.
On the other hand, Elton
(2003) proposes that the Sharpe ratio
looks the investment decision from
the investors point of view.
Therefore, it assumes investors to
choose mutual funds to represent
majority of their investments. If it is
so, investors are only concerned
with the full risk of the fund and the
standard deviation is a reasonable
measure for that risk. Hence, the
employment of the standard
deviation as a risk component makes
the Sharpe ratio most useful in
situations where the investor has
only one risky investment. Elton
( 2003)
In practice, there may be
situations
when
funds
have
underperformed the risk-free interest
rate on average and hence have
negative excess returns. To be more
specific, when sorting funds based
on the Sharpe ratio in descending
order the funds will be ordered
correctly if the excess return is
positive. On the other hand, if the
return is negative sorting funds in
descending order will lead to
unreliable rankings. For example, in
a case of two funds with equal
positive excess return, the one with
56
the lower standard deviation will

receive the highest score.
However, if the average
excess returns are equal but
negative, the fund with the higher
standard deviation receives the
highest Sharpe ratio score (less
negative). Therefore, comparing the
Sharpe ratios e.g. when analyzing
different funds can cause problems.
5.4 Treynor ratio

The Treynor ratio (sometimes called
the reward-to-volatility ratio or
Treynor measure), named after Jack
L. Treynor is a measurement of the
returns earned in excess of that
which could have been earned on an
investment that has no diversifiable
risk (e.g., Treasury Bills or a
completely diversified portfolio), per
each unit of market risk assumed.
The Treynor ratio relates
excess return over the risk-free rate
to the additional risk taken; however,
systematic risk is used instead of
total risk.
The higher the Treynor ratio,
the better the performance of the
portfolio under analysis.
r r
T i f
Bi
where:
T- Treynor ratio, Ri- portfolio
i's return, Rf- risk free rate, Biportfolio i's beta.
Limitations:
Like the Sharpe ratio, the
Treynor ratio does not quantify the
value added, if any, of active
portfolio management. It is a
ranking criterion only. A ranking of
portfolios based on the Treynor
Ratio is only useful if the portfolios
under consideration are subportfolios of a broader, fully
diversified portfolio.
If this is not the case,
portfolios with identical systematic
57
risk, but different total risk, will be

rated the same. But the portfolio
with a higher total risk is less
diversified and therefore has a
higher unsystematic risk which is
not priced in the market.
An alternative method of
ranking portfolio management is
Jensen's alpha, which quantifies the
added return as the excess return
above the security market line in the
capital asset pricing model. As these
two methods both determine
rankings based on systematic risk
alone, they will rank portfolios
identically.
5.5 Expected Return

The expected return from investing
in a security over some future
holding period is an estimate of the
future outcome of this security.
Although
the
Expected
Return is an estimate of an
investors expectations of the future,
it can be estimated using either ex
ante (forward looking) or ex post
(historical) data.
If the expected return is
equal to or greater than the required
return, purchase the security.
Regardless of how the
individual returns are calculated, the
Expected Return of a Portfolio is the
weighted sum of the individual
returns from the securities making
up the portfolio:
N
E ( R ) P wn E ( R ) n
n 1
Ex ante expected return

calculations
are
based
on
probabilities of the future states of
nature and the expected return in
each state of nature. Sum over all
states of nature, the product of the
probability of a state of nature and
the return projected in that state.
58
Ex post expected return

calculations are based on historical
data. Add the historical returns and
then divide by the number of
observations.
5.6 Variance and Standard

Deviation
Variance is a measure of the
dispersion in outcomes around the
expected value. It is used as an
indication of the risk inherent in the
security. Standard deviation is the
square root of variance.
Ex ante variance calculation:
The expected return is
subtracted from the return within
each state of nature; this difference
is then squared.
Each squared difference is
multiplied by the probability of the
state of nature.
These weighted squared
terms are then summed together
S
2 [ R s E ( R)] 2 Ps
s 1
Ex post variance calculation:

The average return is
subtracted from each single period
return; this difference is then
squared.
The squared differences are
summed.
This sum is divided by the
number of periods (using population
data) or the number of periods minus
1 (using sample data).
Population data
T
2 ( Rt E ( R )) 2 (T )
t 1
Sample data
T
2 ( Rt E ( R )) 2 (T 1)
t 1
5.7 Beta
59
Beta is a measure of volatility, or

relative systematic risk, for single
assets or portfolios.
iM iM i
i 2
M
M
Historical beta is usually
estimated by regressing the excess
asset returns for the company or
portfolio (y-variable: Ri - Rf) against
the excess market returns (xvariable: Rm - Rf) i.e., through the
use of a characteristic line. The beta
of a portfolio is:
Port wi i
.
5.8 Portfolio management

One factor why some fund managers
outperform others may be due to
different
investment
strategies.
Therefore, depending on the fund
management style, a distinction is
often made between passive and
active
management
in
the
investment industry. Advocates of
passive management believe that the
markets behave according to the
efficient market hypothesis.
Therefore, a simplest case of
passive management strategy seeks
to match the return and risk of a
market segment or an index by
replicating exactly its composition.
Elton ( 2003)
A fund replicating some
index buys each stock in the index in
exactly the same amount it
represents of the index. Although
replicating some certain index is the
simplest technique for constructing
an index fund, many of index funds
are not constructed this way. Elton
(2003) this is mainly because
passive managers face various
decisions and problems when trying
to replicate an index.
These involve e.g. dealing
with transaction costs and the tradeoff between accuracy in replicating
60
the index.15 Therefore, the manager

has to decide if it is necessary to buy
some stocks with smallest market
weight or exclude them in order to
lower the transaction costs. Elton
(2003)
Elton suggests a couple of
approaches to construct an index
fund. Each of these approaches
makes a distinction between
accuracy in replicating the index and
transaction costs. These three
approaches are as follows:
1. Holding each stock in the
proportion that it represents of the
index.
2. Mathematically forming a
portfolio with specified number of
stocks (e.g. 300), which best tracks
the index historically.
3. Finding a smaller set of
stocks that matches the index in the
percent invested in a specified set of
characteristics (e.g. same percent in
industrial, utility and financial
stocks).
Commonly
used
characteristics have been sector,
industry, quality and size of
capitalization.
Moreover, also combinations
of all three approaches can be used
to construct an index fund. Active
management instead, takes a
different position from the passive
management.
Active portfolio managers do
not follow the efficient market
hypothesis. They believe that it is
possible to profit from the stock
markets through various strategies
that aim to identify mispriced
securities.
Therefore,
active
management is based strongly on a
forecast about the future. Existing
literature has normally classified
active management styles into three
15 This trade off is often called
tracking error.
61
classes; market timers, sector

selectors and security selectors.
Market timers change the
beta of the portfolio according to
their forecasts on the market. If an
active manager assumes the bull
market, he will increase the beta of
the portfolio and when the bear
market is assumed then the manager
will lower the beta of the portfolio,
respectively16
For example, the portfolio
composition toward higher beta can
be implemented as follows: By
increasing the ratio of stocks to other
assets (for example bonds)
By investing in stock whose
market risk (beta) is greater
compared with the stock that was
previously included in the portfolio.
The beta of the portfolio can
be raised by investing in offensive
derivatives e.g. buying forward
contracts or options.
When the bull market is
assumed the implementation is done
the other way around. Another active
management style is security
selection. This means searching for
undervalued securities.
Managers who are practicing
security selection are making bets
that the market weights on securities
are not the optimum amount to hold
in
each
security.
Therefore,
managers increase the weight of
undervalued stocks (i.e. make a
positive bet) and decrease the weight
of overvalued stock.
A third frequently used
method
in
active
portfolio
management is sector or industry
selection. This is similar to security
16 The term bull market is
often used to describe a stock
market that is rising or is
expected to rise. Respectively,
the term bear market refers
to declining markets.
62
selection with the exception that the

unit of interest is a certain sector or
an industry. Based on the analysis, a
positive or negative bet will be made
on a sector. Managers who practice
sector selection will rotate their
portfolios
overweighting
and
underweighting sectors over time as
their forecasts change. Elton (2003).
However, despite the various
strategies discussed above especially
managers managing the emerging
market funds may face some
problems when trying to implement
these strategies.
For example, transaction
costs may be higher in the emerging
markets. Moreover, some trading
barriers may exist. Therefore, these
problems
may
prevent
fund
managers from followings some
certain investment strategies.
63
6 PRACTICAL
BACKGROUND
6.1 Finding out the best

investment funds
Investment funds evaluation
is a central topic of research in
Finance. It is not completely
answered yet.
- New papers are published
in the top journal every year.
- And new
performance
measures emerges always than a
new asset pricing model is
developed.
The evaluation of portfolio
performance is important for several
reasons. First, the investor, whose
funds have been invested in the
portfolio, needs to know the relative
performance of the portfolio. The
performance review must generate
and provide information that will
help the investor to assess any need
for rebalancing of his investments.
Second, the management of the
portfolio needs this information to
evaluate the performance of the
manager of the portfolio and to
determine
the
managers
compensation, if that is tied to the
portfolio performance.
64
We decided to choose the

traditional performance measures
from sixties:
Sharpe Ratio (1966)
Treynor Index (1961)
Jensens Alpha (1960)
Sharpe = (return risk-free
return) / (std. dev. of portfolio) This
is a measure of total risk adjusted
performance
Sharpe rule- Choose position
with higher Sharpe ratio, where
Sharpe ratio is ratio of risk premium
to position over measure of risk
expressed as standard deviation of
returns of a specific position
Treynor = (return risk-free
return) / beta This is a measure of
systematic
risk-adjusted
performance where the systematic
risk is the market risk (nonsystematic risk is event risk that
cannot be diversified away)
Treynor
ruleChoose
position with higher Treynor ratio,
where Treynor ratio is ratio of risk
premium to position over measure of
risk expressed as beta of a specific
position.
Assumes
completely
diversified portfolio
Jensens Alpha = (Return of
security risk free return) - {beta *
(return on market risk-free return)}
Notice that if CAPM is correct the
first term on the right hand side
equals the second term on the right
hand side and Jensens Alpha = 0. A
positive value for Jensens alpha
implies the portfolio has value in
excess of the expected return for a
given risk level whereas negative
alpha implies the opposite.
Jensen rule- Choose position with
positive
regression
intercept
included in CAPM expression. The
intercept will be positive when a
portfolio manager achieves better
returns than the aggregate market
To sum up:
65
Sharpe measures excess

return over total risk (std dev of
portfolio)
Treynor measures excess
return over market (beta)
Jensens Alpha measures
excess over CAPM expected return
So, Sharpe use Total Risk,
Treynor & Jensens use Systematic
Risk
For our purpose, notably
finding out the best fund, we will
use these 3 risk-adjusted methods.
For Russian investment
funds analysis we will choose 20 of
investment funds. We use the source
the
League
of
Management
Companies of Russia and choose the
biggest funds according to their net
asset
value
(NAV).
We are going to use monthly returns
from 31 of May 2012 to 31 of May
2014
We will choose 4 funds from 5
different categories as:
open-end stocks
open-end bonds
closed-end REIT (real-estate
investment trust)
interval stocks
interval blend
Here you can see the table 2
Chosen funds. In table you can see
the funds names, types and
categories of investment fins, names
of asset management companies
(AMC), and net asset value (NAV)
in millions of rubles.
Name
Type
Categor
y
Reserve
Open-end
Bonds
Sberbank Bonds Ilia

Muromets
Open-end
Bonds
Open-end
Bonds
Open-end
Bonds
Raiffeisen - Bonds
Alfa Capital Reserve
Fund
Asset
Managemen
t Company
Trust
Investment
Company
Sberbank
Asset
Management
Raiffeisen
Capital, Ltd.
Alfa Capital,
Ltd.
66
NAV, million of
rubles
9 067,9
7 318,9
5 543,5
2 686,3
URALSIB First
Sberbank Stocks
Dobrynia Nikitich
Sberbank
Telecommucications
and technologies
Open-end
Equity
Open-end
Equity
Open-end
Equity
Open-end
Equity
Interval
Interval
Interval
Equity
Equity
Equity
Interval
Equity
Alfa Capital
Interval
Blend
Oil Fund of Industrial

Reconstruction and
Development
Interval
Blend
Energy Invest
CapitalInvest - Interval
Interval
Interval
Blend
Blend
RVM Megapolis
Close-end
Sberbank Global
Internet
URALSIB Prospective
Investments
High Tech
Investbalance
Alfa Capital Equity
Growth
REIT
REIT
TrastUnion Earth
Close-end
Delovoy Centr
Close-end
Reconstruction and
Development
Close-end
REIT
REIT
URALSIB,
JSC
Sberbank
Asset
Management
Sberbank
Asset
Management
Sberbank
Asset
Management
URALSIB,
JSC
Capital, Ltd.
Capital, Ltd.
Alfa Capital,
Ltd.
Alfa Capital,
Ltd.
Capital, Ltd.
Energy
Invest, Ltd.
Strategy JSC
RWM
Capital, JSC
TrustUnion
Asset
Management
, Ltd.
Navigator,
Ltd.
Kalita
Business
House, Ltd.
Table 2 Chosen funds
In the beginning we are

going to get the monthly returns
according to share price and based
on the received data we calculate:
Average return
Volatility (Standard Deviation)
Beta
Sharpe Ratio
Treynor
Ratio
Jensens
Alpha
The data of monthly share price and
67
4 605,4
2 708,9
2 005,0
1 838,7
1 080,9
440,6
368,7
299,2
1 126,1
907,2
395,8
117,5
12 519,4
7 362,6
6 848,2
6 187,8
return you can find in annex, tables

from open-end bond fund to closed
real
estate
funds.
As market return we will choose the
index MICEX.
The MICEX Index is a
capitalization-weighted composite
index calculated based on prices of
the 50 most liquid Russian stocks of
the
largest
and
dynamically
developing Russian issuers with
economic activities related to the
main sectors of the Russian
economy
presented
on
the
Exchange.
The MICEX Index was
launched on September 22, 1997.
The Index is calculated in real time
and denominated in rubles. The
MICEX is one of the 2 main Russian
index. (the second one is RTS)
You will find the monthly
MICEX data in annex (table 15
MICEX)
For risk free calculations we
are going to choose Risk free Russia
10 year bond because investment
companies invest their money for the
long period of time and we must
chose the appropriate risk free asset
after that we will make funds
ranking according to the received
data. (See in annex table 16 Riskfree Russia 10-Year Bond).
We are going to find out
what kind of funds outperform or
underperform the benchmark.
Here you can see the table 3
Funds expected return annual. We
68
use ranking from largest to smallest

percentage. Also we included market
value to make it clear which funds
underperformed or outperformed the
benchmark.
Indicators of expected return
for the whole period of 13 mutual
funds are higher than the value of
expected return of the index
MICEX, notably 0,3 % per month. It
is 3,6% per annum. The mutual fund
Delovoy Centr shown us the
highest expected return is 4,08% per
month or 48,95% per annum. This
expected return indicates that from
every invested ruble we supposing to
get 48,95 kopeck (Russian small
change)
Fund name
Delovoy Centr
Reconstruction and Development
Sberbank Global Internet
Sberbank Telecommucications and technologies
Sberbank Stocks Dobrynia Nikitich
Alfa Capital Reserve Fund
Raiffeisen - Bonds
Sberbank Bonds Ilia Muromets
Reserve
High Tech
Energy Invest
Alfa Capital
MARKET
Investbalance
RVM Megapolis
Oil Fund of Industrial Reconstruction and
Development
URALSIB First
TrastUnion Earth
Alfa Capital Equity Growth
URALSIB Prospective Investments
Table 3. Funds expected return
annual
69
Expected return
annual
48,95%
24,60%
22,18%
19,79%
7,72%
7,43%
6,30%
6,15%
6,08%
5,97%
5,49%
5,35%
3,99%
3,64%
3,57%
0,79%
0,59%
0,59%
0,55%
0,36%
-2,58%
In the table 4 funds volatility

you may see annual volatility for 20
chosen funds and market volatility.
The standard deviation of funds
return in 13 cases out of 20 is less
than the base index. Index volatility
is equal to 4,9% per month it is
13,52% per annum. Everything
indicates that investment in mutual
funds is less risky than in index.
Open-end bonds fund Reserve has
the lowest standard deviation is
1,5% per annum, however the
expected return is 6,12 per annum.
Fund name
Delovoy Centr
URALSIB First
MARKET
Energy Invest
High Tech
Investbalance
Alfa Capital
Development
RVM Megapolis
Raiffeisen - Bonds
TrastUnion Earth
Reserve
Table 4. Funds volatility
In the following table 5

you will see funds beta. We use
ranking from highest to smallest
beta. The beta coefficient shows that
market is going to act on changing
of portfolios return. Assets with the
beta more than 1 are more risky than
the market, and assets with the beta
less than 1 are less risky. In case of
70
Volatility
49,87%
17,69%
17,35%
16,88%
16,24%
15,41%
15,20%
13,52%
13,22%
10,38%
10,21%
9,45%
6,99%
6,44%
6,03%
4,95%
4,32%
3,46%
1,97%
1,87%
1,50%
negative beta the funds result will

be opposite to market. In our
investigation all funds have the
coefficient less than 1 and 9 funds
out of 20 have negative beta, this
points to the fact that all chosen
funds are suitable for risk averse
investors.
Fund name
MARKET
Delovoy Centr
URALSIB First
Energy Invest
High Tech
Investbalance
Raiffeisen - Bonds
Alfa Capital
TrastUnion Earth
Reserve
Development
RVM Megapolis
Table 5. Funds Beta
We would like to present the

1 traditional performance measureSharpe Ratio, also known as Sharp
Index, or Reward-to-Variability
ratio, is a popular indicator for
measuring
return-to-risk.
This
coefficient shows us what kind of
funds return is going to be per unit
of risk with regard to return of riskfree asset.
This coefficient is used for
comparison of effectiveness result of
investment in various investment
st
71
Beta
1
0,932
0,334
0,244
0,212
0,137
0,122
0,039
0,015
0,012
0,007
0,000
-0,009
-0,011
-0,015
-0,023
-0,040
-0,061
-0,114
-0,175
-0,221
funds. The greater a portfolio's

Sharpe ratio, the better its riskadjusted performance has been.
Positive values indicate better
performance compared to risk-free
investments and negative values
indicate worse performance.
In the table 6, we can see our
calculation results of Sharpe Ratio of
20 Russian funds. It is worth noting
that only 6 funds out of 20 have
Sharpe ratio less than the benchmark
that gives us the evidence of high
effectiveness of funds management.
Alfa Capital Reserve Fund has the
highest Sharpe Ratio of 2,635.
Fund name
Reserve
Raiffeisen - Bonds
Delovoy Centr
High Tech
Energy Invest
Alfa Capital
Investbalance
MARKET
URALSIB First
Development
RVM Megapolis
TrastUnion Earth
Table 6. Funds Sharpe ratio
The
next
traditional
performance measure- Treynor
Ratio, named after Jack Treynor, is
another
useful
measure
of
performance that is also relevant
when comparing mutual funds
72
Sharpe Ratio
2,635
2,383
1,672
1,278
1,097
1,025
0,931
0,845
0,576
0,301
0,294
0,275
0,214
0,114
0,085
-0,108
-0,131
-0,296
-0,334
-0,345
-0,985
within a category. The Treynor Ratio

is a mutual fund's excess return
divided by its beta, where excess
return is the actual return less the
risk-free rate of return. The Treynor
Ratio is a measure of excess return
per unit of systematic risk.
Comparing the Treynor ratio
for the fund with the market excess
return we can analyze if the manager
obtained superior performance.
In the table 7 Funds Treynor
Ratio you can find Treynor Ratio of
20 funds and market, which is equal
to 0,011 . We can see that 11 funds
from 20 have the indicator higher, so
managers of these funds showed
superior information or management
skills. The best one is Alfa Capital
with 76,091
Fund name
Alfa Capital
Raiffeisen - Bonds
TrastUnion Earth
Development
Investbalance
High Tech
Delovoy Centr
RVM Megapolis
Energy Invest
MARKET
URALSIB First
Reserve
Table 7. Funds Treynor ratio
Finally, the 3rd traditional

performance measure is Jensens
73
Treynor Ratio
76,091
5,547
2,279
2,226
1,266
0,887
0,772
0,498
0,430
0,247
0,235
0,011
-0,057
-0,156
-0,208
-0,596
-0,987
-0,998
-1,723
-2,157
-3,191
Alfa. It can be defined as the

differential between the return on the
portfolio and the return explained by
the market model.
Also, it can be defined as the
intercept in a regression of the
portfolio excess return against the
market excess return.
If >0 the excess fund
returns are not completely explained
by the CAPM and the fund manager
seem to have some extra skills in
portfolio management or superior
information. If p <0 the fund
manager
obtained
inferior
performance.
In the table 8, we are going
to see the ranking data from the
highest to smallest Jensen Alfa.
Therefore,14 Russian investment
companies out of 20 have alpha
more than 0. The highest result has
Delovoy Centr with 45,38.
Fund name
Delovoy Centr
Raiffeisen - Bonds
Reserve
High Tech
Energy Invest
Alfa Capital
Investbalance
MARKET
RVM Megapolis
Development
TrastUnion Earth
URALSIB First
Table 8. Funds Jensen alpha
74
Jensen Alfa
45,38%
22,35%
19,82%
17,50%
4,98%
4,96%
3,79%
3,72%
3,59%
3,45%
2,95%
2,72%
1,50%
1,06%
0,00%
-1,66%
-1,89%
-1,93%
-2,29%
-2,29%
-5,36%
To sum up, represented funds

in
general
outperform
the
benchmark.
Then, to find out the 5 best
investment funds out of 20 we have
chosen 3 measures: Sharpe Ratio,
Treynor Ratio, Jensens Alpha and
calculated the average of these 3
statistics. Then we sorted the funds
according to the average, the higher
the average the better. Our results
you can see in the table 9. This table
represents
all
3
traditional
performance measures, average
weights and grade according to the
average.
As you can see 14 funds
outperform the average grade of the
benchmark.
Fund name
Alfa Capital
Delovoy Centr
Sberbank Telecommucications
and technologies
Raiffeisen - Bonds
Sberbank Stocks Dobrynia
Nikitich
High Tech
Energy Invest
Reserve
Investbalance
MARKET
TrastUnion Earth
Oil Fund of Industrial
RVM Megapolis
URALSIB First
URALSIB Prospective
Investments
Sharpe
Ratio
0,214
0,931
1,672
1,278
Treynor
Ratio
76,091
0,498
-0,998
-1,723
Jensen
Alfa
1,5
45,38
22,35
19,82
Average
25,935
15,603
7,675
6,458
Grade
1
2
3
4
1,025
1,097
0,576
-0,987
5,547
2,279
17,5
3,79
3,45
5,846
3,478
2,102
5
6
7
0,301
2,635
0,294
0,845
0,275
2,383
0,114
0,085
-0,985
0,247
-2,157
0,772
-0,596
0,235
-3,191
0,887
0,011
2,226
4,98
4,96
2,95
3,72
2,72
3,59
1,06
0,00
-1,93
1,843
1,813
1,339
1,323
1,077
0,927
0,687
0,032
-0,230
8
9
10
11
12
13
14
15
16
-0,296
-0,345
-0,108
-0,131
1,266
0,430
-0,057
-0,156
-1,89
-1,66
-2,29
-2,29
-0,307
-0,525
-0,818
-0,859
17
18
19
20
-0,334
-0,208
-5,36
-1,967
21
Table 9 summary table
75
6.2 Recommendations for

investors
We have analyzed 20 funds in
different categories and found out
the 5 best investment funds. Now we
are willing to give recommendations
for risk averse and risky investors.
For risk averse investors:
According to our results the
best fund is Alfa Capital. It is
Interval Blend Fund. This fund is
suitable for conservative investor. A
conservative investor is someone
who wants his money to grow but
does not want to risk his principle
investment. Conservative investors
choose financial products that do not
fluctuate much in value. This is a
wise investment strategy when the
investment money is needed soon or
when the economy is in the midst of
a major downturn.
However,
conservative
investors miss out on explosive
growth during times of economic
prosperity.
Putting up the capital in the
open-end fund Alfa Capital , a
conservative investor will have
return of 3,99% per annum. This
every invested ruble he supposing to
get 3,99 kopeck. Volatility of return
is going to be 6,99%. The expected
return is supposed to be in interval
between -3% and 9,98% with
probability of 0,68.
The beta coefficient is 0,0002
it means that Alfa Capital is
increasing and decreasing in 0,0002,
so less than index. That is mean fund
is almost independent of market
movements. If the index grows for
+1% then you can find that open-end
fund increased on +0,0002%, index
fell on 2%, open-end fund fell on
0,0004%.
The coefficient alpha is 1,5
means that fund showed the return
76
of 0,0002 equal to index return, plus

1,5%. Sharp coefficient is 0,214,
Treynor coefficient is 76,1 means
that the systematic risk and total risk
are low, and it is saying about good
funds management.
2. The 2nd place takes the
closed-end fund REIT Delovoy
Centr. The fund is orientated on
investors who are interested in long
term investments in real estate
market.
Investing in the closed-end
fund REIT Delovoy Centr will
have the high risk, close to bonds
risk or lower. That because in REIT
included real-estate and such realestate has a value, therefore, funds
shares is going to provide
themselves with that stock. The
disadvantage for risk averse investor
is long-term investment. Generally
such investors are willing to invest
their money for 3 years. But such
consequence is compensating by
high funds return.
An investor will expect
annual return of 48,95% . This
every invested ruble he supposing to
get 48,95
kopeck. Standard
deviation of investment is very high
49.87%, but it is related with shares
increasing for 70% in November
2012, in what follows we see stable
price growth.The beta is 0,93
indicates that Delovoy Centr
growing and falling in very close
way to index.
If the index grows for +1%
then you can find that open-end fund
fell on 0,93%, index fell on 2%,
open-end fund increased on 1,86%.
of 0,93, equal to index return, plus
45,38%. Sharpe coefficient is 0,93
and Treynor coefficient is 0,50, both
are positive and it is means good
77
risk/return correlation and good

funds management.
The 3rd place takes the
closed-end
fund
REIT
Reconstruction and Development.
The fund is orientated on investors
who are interested in long term
investments in real estate market.
An investor will expect annual
return of 24,6% . This expected
return indicates that from every
invested ruble he supposing to get
24,6 kopeck. Volatility is 13,22%.
The
range
of
return
dispersion will be between 11,38%
and 37,82% with probability of
0,68. The beta is -0,22 indicates that
growing and falling in opposite way
to index.
fell on 0,22%, index fell on 2%,
of -0,22, equal to index return, plus
22,35%. Sharpe coefficient is 1,67 it
is positive and it is good risk/return
correlation.
At the same time Treynor
coefficient is -1, and indicates on
high systematic risk in a selected
construction sector.
Also it is worth mentioning
such funds for risk-averse investors
Raiffeisen - Bonds (Openend Bonds fund)
CapitalInvest
Interval
(Interval Blend Fund)
Energy Invest (Interval Blend
Fund)
So, these funds outperform
the benchmark and refer to
categories intended for such type of
investor.
For risky investors:
The 4th position takes
Sberbank Global Internet. The
open-end fund, equity. In such fund
78
invest their money aggressive

investors.
Aggressive investors tend to
concentrate on equity investments
such as individual stocks and mutual
funds. They are open to more risk,
willing to see large short term
swings in market performance on an
annualized basis. They aim for large
growth in the market, often above
what the long term market
performance has shown.
They are also seeking quick
growth in their portfolio, and some
are even called "Day Traders." The
recommendation for this investor is
to have a minimum timeframe of 15
years before they will need their
principal investment, to allow for
variations in the market to average
out. The average rates of return that
an aggressive investor expects to see
is between 12-14%, a few
percentage points above the long
term stock market average.
Investing
in
Sberbank
Global Internet aggressive investor
will expect the revenue 22,18% per
annum. Risk of investment is going
to be 15,41%. This expected return
indicates that from every invested
ruble he supposing to get 22,18
kopeck.
The expected return is
supposed to be in an interval
between 6,77% and 37,59% with
probability of 0,68. The beta
coefficient is -0,114 it means that
Sberbank Global Internet is
increasing and decreasing in 0,007
in opposite way to index.
fell on -0,114%, index fell on 2%,
19,82%.
79
Sharp coefficient is 1,28,

Treynor coefficient is -1,723 that
means the high nondiversified or
systematic risk it is connected with
investment in high-technological
sector
5. The 5th position is
Sberbank Telecommucications and
technologies. It is also open-end
equity fund, attractive for risky
investors.
An investor will expect
19,79% annual return. Volatility of
returns is going to be also high
16,88%. The range of return
dispersion will be between 2,91%
and 36,67% with probability of
0,68. The beta is -0,18 indicates that
Sberbank Telecommucications and
technologies growing and falling in
opposite way to index.
17,50%. Sharpe coefficient is 1,02 it
is positive and it is good risk/return
correlation. At the same time
Treynor coefficient is -0,99, and
indicates it is not effective funds
management for 2 years, partly due
to systematic risk.
Also it is worth mentioning
such funds for risk-averse investors
Sberbank Stocks Dobrynia
Nikitich (Open-end Equity fund)
High Tech (Interval Equity
Fund)
Investbalance
(Interval
Equity Fund)
So, these funds outperform
the benchmark and refer to
categories intended for such type of
investor.
80
7
CONCLUSIONS
In our final project we have been
investigating Russian investment
funds. It was found out that an
investment
fund
is
simple
investment tool which permits to
combine cash assets of many
investors for investing in securities.
Monetary resources can be invested
in shares, bonds, loan securities,
money market instruments and its
combinations.
These securities ruled by
professionals of asset management
companies. Each investor has a
share in portfolio of securities in
proportion to its investment; he can
receive return and also bear the risk
of loss.
We described theoretic and
practical basis in our final research.
For practical part we have chosen
the source League of Management
Companies of Russia to make
calculations using the data from the
source. We decided to choose the
traditional performance measures
from
sixties:
Sharpe
Ratio
(1966),Treynor
Index
(1961),Jensens Alpha (1960)
We made lookback study of
investment funds in Russia from
1996 till our days. Then we analyzed
the modern funds situation in
Russia. We mentioned, that in 1996
first assets management companies
like Pioglobal Asset Management ,
81
ABO
Capital,
Pallada
asset
management,
Sberbank
Asset
Management were subjects to
licensing in Russia. Nowadays there
are 407 companies and 1397 funds.
We have showed the growth
dynamic of investment funds and
asset management companies and
made conclusions.
In our investigation we have
analyzed 20 of Russian investments
funds, found out 5 best funds and
made
recommendations
for
investors.
It is worth saying that many
Russian investment funds increase
benchmark. We can speak about
good funds management and funds
development in Russia.
Taking all the aforesaid into
consideration, we can make the
conclusion that the development of
investment funds in Russia will
depends on Russian economic
growth, budgetary policy, economic
policy, tax policy, social policy,
international policy of state and
authority which regulates stock
exchange. For the latest years we
can observe the steady economic
growth, as it was mentioned above.
That is why we can say about good
investment funds development in
Russia. What is more, we see that
the financial market in Russia is
developing and one year ago there
was introduced the first exchange
traded fund.
What is more, year by year investors
are more satisfied with investment in
Russia.
We consider investment fund
is a good tool for investing.
82
8
BIBLIOGRAPHY
1. Babalos, W. Caporale, M. G.
Kostakis, A. Phillippas,
N(2007).Testing
for
persistence in mutual fund
performance and the ex post
variation problem: Evidence
from
Greek
market.
University
of
Piraeus,
Greece, Working Paper, pp.
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2. Bodie, Kane & Marcus
(2005).
Essentials
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th
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3. Craig, W. French (2003)
The Treynor Capital Asset
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4. Chen, M. H(2003). Risk
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5. Cuthbertson,
K(2000).
Quantitative
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6. Elton, E. J. Gruber, M. J.
Brown, S. J. Goetzmann, W.
N (2003.) Modern Portfolio
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Investment
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(1992).The cross section of
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8. Fama, E. F, French, K.
R(1993). Common risk
factors in the returns on
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stocks and bonds. The

Journal
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Financial
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pp. 3-56.
9. Jensen, M. C (1968). The
performance of mutual funds
in the period 1945-1964.
The Journal of Finance, vol.
23, no. 2, pp. 389-416
10. Jensen, M. C (1969). Risk,
the pricing of capital assets
and the evaluation of
investment
portfolios.
Journal of Business, vol. 42,
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11. Prigent, J. L (2007.) Portfolio
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LLC.
12. Roll, R (1977). A critique of
the asset pricing theory tests:
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testability of the theory.
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13. Sharpe, W. F.: Mutual fund
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14. Sharpe, W. F Alexander, G. J.
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15. Sharpe, W. F (1994). The
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16. Smirnov, V. (2009). Taxation
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17. Unknown author (2009)

How mutual funds and
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in
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[April 2014].
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85
9 ANNEX
Reserve
Date
30.5.14
30.4.14
31.3.14
28.2.14
31.1.14
31.12.13
29.11.13
31.10.13
30.9.13
30.8.13
31.7.13
28.6.13
31.5.13
30.4.13
29.3.13
28.2.13
31.1.13
29.12.12
30.11.12
31.10.12
28.9.12
31.8.12
31.7.12
29.6.12
31.5.12
Share
price
57,72
57,69
57,62
57,99
57,75
57,43
57,07
56,96
56,49
55,95
55,70
55,19
55,28
55,37
54,68
54,40
54,07
53,56
53,24
52,99
52,56
52,32
51,92
51,44
51,14
Month.
return
0,00
0,00
-0,01
0,00
0,01
0,01
0,00
0,01
0,01
0,00
0,01
0,00
0,00
0,01
0,01
0,01
0,01
0,01
0,00
0,01
0,00
0,01
0,01
0,01
Sberbank
Bonds Ilia
Muromets
Share
Month.
price
return
23566
23511
0,00
23628
0,00
24115
-0,02
23864
0,01
23456
0,02
23608
-0,01
23449
0,01
22698
0,03
23256
-0,02
23510
-0,01
23288
0,01
23371
0,00
23080
0,01
23050
0,00
22840
0,01
22675
0,01
22323
0,02
21984
0,02
21594
0,02
21433
0,01
21355
0,00
21225
0,01
20982
0,01
20883
0,00
Table 10 Open-end Bonds funds
86
Raiffeisen Bonds
Share
price
16173
15796
16041
16429
16351
16327
16228
16300
16197
15988
15904
15789
15767
15702
15437
15424
15367
15252
15190
14894
14706
14640
14569
14384
14281
Month.
return
0,02
-0,02
-0,02
0,00
0,00
0,01
0,00
0,01
0,01
0,01
0,01
0,00
0,00
0,02
0,00
0,00
0,01
0,00
0,02
0,01
0,00
0,00
0,01
0,01
Alfa
Rese
Share
price
2302
2287
2300
2320
2313
2300
2288
2287
2271
2251
2237
2219
2211
2196
2175
2157
2140
2099
2075
2058
2042
2028
2013
1995
1985
Date
30.5.14
30.4.14
31.3.14
28.2.14
31.1.14
31.12.13
29.11.13
31.10.13
30.9.13
30.8.13
31.7.13
28.6.13
31.5.13
30.4.13
29.3.13
28.2.13
31.1.13
29.12.12
30.11.12
31.10.12
28.9.12
31.8.12
31.7.12
29.6.12
31.5.12
URALSIB First
Sberbank
Stocks Dobrynia
Nikitich
Sberbank
Telecommucic
ations and
technologies
Sberb
In
Share
price
9541
8569
8982
9328
9492
9873
9841
10381
10134
9581
9249
8884
8667
8970
9768
10476
11006
10526
10503
10750
11210
11388
10832
10659
9713
Share
price
6580
5710
5978
6485
6569
6844
6797
6828
6635
6282
6270
5919
6037
6047
6375
6673
6815
6484
6204
6397
6655
6519
6316
6106
5801
Share
price
2698
2488
2729
3045
2937
3084
2978
2827
2634
2497
2464
2330
2258
2224
2168
2171
2096
1966
1923
1990
2046
1999
1874
1915
1872
Share
price
1528
1393
1512
1661
1586
1602
1536
1473
1420
1339
1315
1208
1174
1116
1094
1099
1095
1039
1048
1037
1081
1082
1049
1021
1007
Month.
return
0,11
-0,05
-0,04
-0,02
-0,04
0,00
-0,05
0,02
0,06
0,04
0,04
0,03
-0,03
-0,08
-0,07
-0,05
0,05
0,00
-0,02
-0,04
-0,02
0,05
0,02
0,10
Table 11. Open-end Equity funds
87
Month.
return
0,15
-0,04
-0,08
-0,01
-0,04
0,01
0,00
0,03
0,06
0,00
0,06
-0,02
0,00
-0,05
-0,04
-0,02
0,05
0,05
-0,03
-0,04
0,02
0,03
0,03
0,05
Month.
return
0,08
-0,09
-0,10
0,04
-0,05
0,04
0,05
0,07
0,05
0,01
0,06
0,03
0,02
0,03
0,00
0,04
0,07
0,02
-0,03
-0,03
0,02
0,07
-0,02
0,02
Date
30.5.14
30.4.14
31.3.14
28.2.14
31.1.14
31.12.13
29.11.13
31.10.13
30.9.13
30.8.13
31.7.13
28.6.13
31.5.13
30.4.13
29.3.13
28.2.13
31.1.13
29.12.12
30.11.12
31.10.12
28.9.12
31.8.12
31.7.12
29.6.12
31.5.12
URALSIB
Prospective
Investments
Share Month.
price
return
6726
6441
0,04
6436
0,00
7476
-0,14
7635
-0,02
7883
-0,03
7465
0,06
7307
0,02
7109
0,03
7175
-0,01
7183
0,00
7152
0,00
7193
-0,01
7153
0,01
7501
-0,05
8097
-0,07
8058
0,00
7597
0,06
7586
0,00
7747
-0,02
7966
-0,03
7976
0,00
7650
0,04
7631
0,00
7248
0,05
High Tech
Share
price
140028
132805
135714
142021
141464
146392
144304
146213
143603
138763
139364
135206
136014
135869
136054
137157
138389
134368
135108
135665
143823
141428
136668
127506
126732
Month.
return
0,05
-0,02
-0,04
0,00
-0,03
0,01
-0,01
0,02
0,03
0,00
0,03
-0,01
0,00
0,00
-0,01
-0,01
0,03
-0,01
0,00
-0,06
0,02
0,03
0,07
0,01
Investbalance
Share
price
765402
725990
741164
776623
771414
795192
783965
793295
779970
756947
758452
737480
742592
740176
740573
747718
754753
726177
710463
733153
777156
758210
731654
727687
718813
Month.
return
0,05
-0,02
-0,05
0,01
-0,03
0,01
-0,01
0,02
0,03
0,00
0,03
-0,01
0,00
0,00
-0,01
-0,01
0,04
0,02
-0,03
-0,06
0,02
0,04
0,01
0,01
Alf
Equ
Shar
price
1310
1254
1232
1318
1316
1396
1345
1407
1380
1434
1444
1386
1423
1405
1539
1677
1659
1558
1485
1524
1583
1502
1491
1398
1334
Table 12. Interval Equity Funds
Alfa Capital
Date
Share
price
Month.
return
Oil Fund of
Industrial
Reconstruction
and Development
Share
price
88
Month.
return
Energy Invest
Share
price
Month.
return
Cap
In
Shar
price
30.5.14
30.4.14
31.3.14
28.2.14
31.1.14
31.12.13
29.11.13
31.10.13
30.9.13
30.8.13
31.7.13
28.6.13
31.5.13
30.4.13
29.3.13
28.2.13
31.1.13
29.12.12
30.11.12
31.10.12
28.9.12
31.8.12
31.7.12
29.6.12
31.5.12
55,28
53,32
54,64
56,80
57,07
56,58
55,73
56,13
55,71
54,42
54,77
53,41
53,61
54,03
54,54
55,86
56,57
54,03
53,28
53,58
54,33
53,33
52,88
51,63
51,28
0,04
-0,02
-0,04
0,00
0,01
0,02
-0,01
0,01
0,02
-0,01
0,03
0,00
-0,01
-0,01
-0,02
-0,01
0,05
0,01
-0,01
-0,01
0,02
0,01
0,02
0,01
36146
35759
36438
38270
37985
39055
38529
38867
38243
37175
37312
36338
36553
36453
36448
36797
37096
36168
36083
36374
37453
36780
36484
36271
35865
0,01
-0,02
-0,05
0,01
-0,03
0,01
-0,01
0,02
0,03
0,00
0,03
-0,01
0,00
0,00
-0,01
-0,01
0,03
0,00
-0,01
-0,03
0,02
0,01
0,01
0,01
3158
2941
3001
3146
3193
3219
3218
3184
3147
3052
3095
2948
2970
2960
3098
3217
3310
3180
3122
3147
3161
3069
3019
2918
2867
0,07
-0,02
-0,05
-0,01
-0,01
0,00
0,01
0,01
0,03
-0,01
0,05
-0,01
0,00
-0,04
-0,04
-0,03
0,04
0,02
-0,01
0,00
0,03
0,02
0,03
0,02
3938
3776
3833
3872
3882
3831
3751
3812
3804
3799
3776
3684
3723
3699
3821
3830
3876
3825
3753
3767
3808
3712
3648
3556
3508
Table 13. Interval Blend Funds
RVM Megapolis
Date
30.5.14
30.4.14
31.3.14
28.2.14
31.1.14
31.12.13
29.11.13
Share
price
298096
298936
296728
303151
301106
295345
298363
Month.
return
0,00
0,01
-0,02
0,01
0,02
-0,01
TrastUnion
Earth
Share
price
896
885
887
889
891
879
880
89
Month.
return
0,01
0,00
0,00
0,00
0,01
0,00
Recon
Delovoy Centr
Deve
Share
price
2382
2361
2331
2319
2307
2295
2290
Month.
return
0,01
0,01
0,01
0,01
0,01
0,00
Share
price
617
619
609
604
599
581
537
31.10.13
30.9.13
30.8.13
31.7.13
28.6.13
31.5.13
30.4.13
29.3.13
28.2.13
31.1.13
29.12.12
30.11.12
31.10.12
28.9.12
31.8.12
31.7.12
29.6.12
31.5.12
299368
297718
295768
297094
294998
311783
310303
306769
307317
305630
301217
301608
299768
297136
297581
296193
293802
294130
0,00
0,01
0,01
0,00
0,01
-0,05
0,00
0,01
0,00
0,01
0,01
0,00
0,01
0,01
0,00
0,00
0,01
0,00
882
884
885
887
888
890
877
879
880
882
885
886
893
894
894
894
886
886
Table 14. Close-end REIT Funds
90
0,00
0,00
0,00
0,00
0,00
0,00
0,01
0,00
0,00
0,00
0,00
0,00
-0,01
0,00
0,00
0,00
0,01
0,00
2272
2261
2257
2246
2234
2216
2160
2151
2142
2135
2124
2120
1243
1234
1227
1218
1214
1072
0,01
0,00
0,00
0,00
0,01
0,01
0,03
0,00
0,00
0,00
0,01
0,00
0,71
0,01
0,01
0,01
0,00
0,13
535
528
519
521
511
508
431
424
422
419
403
405
400
393
392
389
383
385
Date
01.06.2014
01.05.2014
01.04.2014
01.03.2014
01.02.2014
01.01.2014
01.12.2013
01.11.2013
01.10.2013
01.09.2013
01.08.2013
01.07.2013
01.06.2013
01.05.2013
01.04.2013
01.03.2013
01.02.2013
01.01.2013
01.12.2012
01.11.2012
01.10.2012
01.09.2012
01.08.2012
01.07.2012
01.06.2012
Last price
1466,840
1432,030
1306,010
1369,290
1444,710
1454,450
1504,080
1479,350
1510,210
1462,820
1364,650
1375,790
1330,460
1350,170
1385,880
1438,570
1486,040
1546,760
1474,720
1405,970
1425,700
1458,260
1422,910
1407,020
1387,520
Table 15 index MICEX
91
Monthly returns
0,024
0,096
-0,046
-0,052
-0,007
-0,033
0,017
-0,020
0,032
0,072
-0,008
0,034
-0,015
-0,026
-0,037
-0,032
-0,039
0,049
0,049
-0,014
-0,022
0,025
0,011
0,014
Date
01.06.2014
01.05.2014
01.04.2014
01.03.2014
01.02.2014
01.01.2014
01.12.2013
01.11.2013
01.10.2013
01.09.2013
01.08.2013
01.07.2013
01.06.2013
01.05.2013
01.04.2013
01.03.2013
01.02.2013
01.01.2013
01.12.2012
01.11.2012
01.10.2012
01.09.2012
01.08.2012
01.07.2012
01.06.2012
Last price
8,590
8,600
9,470
8,930
8,330
8,390
7,710
7,810
7,150
7,310
7,710
7,520
7,620
7,360
6,530
6,910
6,690
6,600
6,850
6,930
7,405
7,761
7,860
7,976
8,460
Table 16 Risk-free Russia 10-Year

Bond
92
Monthly returns
-0,001
-0,092
0,060
0,072
-0,007
0,088
-0,013
0,092
-0,022
-0,052
0,025
-0,013
0,035
0,127
-0,055
0,033
0,014
-0,036
-0,012
-0,064
-0,046
-0,013
-0,015
-0,057

The Performance of Investment Companies in Russia

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The Performance of Investment Companies in Russia

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Master in Finance & Banking

THE PERFORMANCE OF INVESTMENT COMPANIES IN RUSSIA

2.3 THE MAIN TYPES OF INVESTMENT

4.2.1 BENEFITS AND RISKS OF A

priority. The Government has set the

repayment, and they may reinvest

investment performance measures as

assets management companies,

investments without reducing the

to U.S. shores. In 1868, the Foreign

followed hampered the growth of

2.3The main types of

Open-end mutual funds must

being redeemed. The per share price

2.3.2 Closed-end funds

market forces (supply and demand)

2.3.3 Interval funds (INF)

Shares may be purchased at

3.1Reasons why invest in

Russia is a vast country that

Russia has one of the largest

1 Data adapted from

government to the Reserve

Figure 1. Growth of modern Russia

According to the figure 1 we

than 40 TIMES (1999- $ 12 bn;

3.2 Russia in Bloombergs

3.3 Investor perspective

4.1 Performance of openend,

investment company is not the

Funds assets of collective

Nowadays there are 3 types of

Bond fund- A bond fund or

put up the capital in goods terminal

Ilya Muromets Bond Fund

Figure 2.Quantity of operating assets

As consistent with above

neither pension funds management.

According to the figure 3, in

structure of Federal Commission for

Money market funds

Figure 4. Percentage of Open-end

Among the open end funds

Money market funds

Here you can see the Closed-end

As you can see in the figure

cash assets- shareholder

Then in the figure 6 there

Money market funds

Art treasures funds

Venture capital funds

Private equity funds

Figure 6.Percentage of Closed-end

6 Data adapted from the source

Figure 7. Comparison of Quantity to

Money market funds

According to the figure 8 we

8 Data adapted from the source

Figure 9.Comparison of Quantity to

Also taking into account the

9 Data adapted from the source

Art treasures funds

Money market funds