Investors interested in buying Russian stocks, who were once limited to the big gun institutional investors, can now do it easy and cheap by the advent of exchange-traded funds (ETFs), The Moscow Times reported.
According to the report, in the old days, investors had to set up a brokerage account and order their broker to buy the shares for them. These accounts were complicated to create and expensive to use, as investors were charged for each transaction. The alternative is to invest into a fund, but most of these have a 2+20 deal where the fund manager takes a 2% commission management fee each year and keeps 20% of any profit the fund makes.
One of the biggest appeals of an ETF is that it charges a flat fee — typically less than 1% of the money under management — making it a far cheaper way to invest in somewhere like Russia.
Russia’s stock market has returned about 30% this year, making it one of the best performing in the world.
“Investing in Russian equity is a rollercoaster ride, but when the market performs, it flies. So far, this has been one of the up years, with Russian stocks outperforming not only the other emerging markets but even the U.S. S&P500 index,” The Moscow Times writes.
The benchmark MSCI Emerging Markets Index has gained 3.42% over 12 months, and the S&P500 5.27%. But Russia’s RTS Index gained 36.57% during the same period. On top of that, investors earned an additional 9.29% if you count the generous dividend payments companies dish out to shareholders.
ETFs take a lot of the leg work out of buying shares as they come as a premade bundle of stocks — typically the biggest and most liquid bluechip names — designed to give the investor a nice balanced portfolio.
And ETFs are sold under various wrappers such as index trackers or growth names. ETFs are also themselves listed on exchanges, so they are easy to cash out of, as the fund itself can be sold at any time, The Moscow Times wrote.