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Transneft Pension Fund exits the Russian state debt

Date of publication: 24 December 2019

As the year 2019 is coming to a close, Russian non-government funds keep looking for alternatives to the market of state bonds, following a series of key rate reductions by the Bank of Russia.

Since the beginning of the year Transneft IPF has cut the share of federal bonds in its portfolio and is now looking at corporate bonds, building up the portfolio’s duration.  The Fund adheres to a conservative investing strategy, meeting the expectations of its founder and clients, points out Director General Olga Andreeva. In her words, the Fund’s total assets by the year’s end may have risen to the level of RUB 112 billion from 108.9 billion as of 1 October 2019.

Ms. Andreeva thus commented on the Fund’s strategy over e-mail:

On asset selection

“We have no minimum threshold for entering an asset. The yield must just be relevant, given our investment model and the market. We estimate our investments through the ratio of a possible investing risk, predicted yield and expected liquidity in this very sequence. Analysing, comparing and making a decision. We’ve been looking intently at corporate bonds of late, which demonstrate a premium to the yield of state bonds, somewhat increasing the portfolio duration.”

On the corporate sector

“The oil and gas as well as retail bonds have shown good yield. We consider a premium in each particular case, proceeding from the issuer’s risk. It averaged 100-110 p.p. across the portfolio.”

On duration

“Because the Fund holds to the conservative management strategy, the RUPCI index serves as a sort of reference point for us. Therefore, we are gradually moving towards the duration of 2.5 years. In fact, we’ve succeeded in extending the duration by six months this year.”

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