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NPFs Will Reimburse Client Losses, Says CB

26.05.2015 12:00 / RBC

The Bank of Russia plans to introduce oversight mechanisms to monitor the effectiveness of NPF investments, announced Collective Investment and Trust Management Department Director at the Bank of Russia Philip Gabunia, speaking at the Future of the Pension Market Roundtable on Tuesday.

Funds invest pension savings in the interests of their clients, however, the yield is not officially fixed, says Gabunia. Banks, for instance, carry a certain responsibility to clients: they are under obligation to add certain income to each deposit. Gabunia sees the need to develop the NPF responsibility mechanism.

“If a fund fails to properly invest pension savings, buying a low-grade low-yield asset and foregoing opportunity to buy quality higher-yield assets, client losses must be reimbursed”, said Gabunia. This is a complicated task, he added: “It remains unclear which investments should be assessed and how, since we cannot apply a unified approach or a formula, they are easy to beat”.

Gabunia stated that the CB will not impose a benchmark on NPFs, analyzing their performance and portfolio instead. “If we find that the NPF serves its own interests instead of clients’ interests, we will issue an order and calculate the reimbursement amount”, said Gabunia. This will stop fund owners benefiting from pension money, he added. “The fund is trusted with pension savings to earn maximum income for pensioners”, said Gabunia. Any quality project can be invested in, but risks must be covered, and yield should be on par with OFZs, he pointed out.

According to Gabunia, the project is under discussion.

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