When introducing venture investments for private pension funds, a maximum share of investments must be determined

11 march 2016 | RIA Novosti

Daniil Nametkin, expert of the Analytical Center, told a RIA Novosti correspondent that in order to ensure successful introduction of the venture investment mechanism for private pension funds it is necessary to determine the maximum share of the funds they can invest in venture projects.

Daniil Nametkin
Daniil Nametkin
Department for Expert Analytics

According to him, around the world pension savings are routinely invested in venture capital funds. Innovative startups that venture funds invest in can generate far bigger returns than other types of investments. However, this promise of high returns comes with very high risk.

“Unlike many Western countries, the Russian market of venture capital investments is still at the inception stage so potential investors find it hard to assess future risks and potential medium term returns,” the expert believes. - “Thus if we want to successfully introduce this mechanism we first need to decide what maximum percentage of private pension funds can be allowed to invest in direct or venture investment funds.”

In addition, to ensure maximum protection for pension savings, it would make sense to develop a methodology for assessing the reliability and financial stability of the funds. For example, if a venture capital fund has been generating positive returns over a long time period, this could serve as one of the key conditions for regarding it as reliable and adept at managing its portfolio. It would also make sense to determine the maximum portion of private pension funds in a venture fund capital to minimize investment risks, Mr. Nametkin added.

Earlier, a draft government action plan for 2016 included a provision allowing private pension funds to invest pension savings in venture companies and funds. However, later drafts of the action plan no longer include this provision. The Ministry of Finance believes venture investments to be too risky for pension savings.