SGIL was launched in December 2016 to provide exposure to Ruble denominated Russian bonds. The investment activity of the fund is aimed at generating income with minimal risk of loss of capital. The manager does not minimize short term price volatility but does make an effort to invest in securities of credit worthy issuers. Although the Fund does not presently intend to hedge its positions against currency risk, the Fund may trade currency or currency-related derivatives, including swaps and forward contracts, and hold cash and near-cash investments in different currencies.

Why Russian bonds? 

  • Yield to maturity is significantly higher than both inflation and deposit rates;
  • A big and liquid market (Ruble bonds market (local and external) is about 23 trillion roubles (USD365 billion) at nominal value; the average trading volume on the Moscow stock exchange is about 50 billion rubles (USD 800m) a day)
  • a large share of Russia's sovereign debt is held by foreign investors, indicating international confidence in this market;
  • Average deposit rate in TOP-10 banks is currently 5%. SGIL has a yield to maturity of 10% (as of May 30 2018);
  • The potential for price growth of bonds is still significant. Inflation has declined as a as a result of monetary policy. Low inflation gives the regulator room for further rate cuts, which should positively affect the value of bonds;
  • High oil prices mean overall macro stability of Russia’s economy.