RUSSIA - Russia's sovereign National Wealth Fund has benefited to the tune of billions following a move earlier this year - to invest in domestic equities - that has been described by analysts as the "trade of the decade".

As global markets collapsed, the fund transferred $175bn (€120bn) to Vneshcombank (VEB), the state banking agent, to invest in Russian equities and bonds, the majority of which went to prop up the domestic stock market. With a recovery of 60% in the main RTS index in recent months, the fund has since seen its portfolio of investments grow by billions.

David Smart, global head of sovereign funds and supranationals at Franklin Templeton, said the economic turmoil of the past 18 months had masked the impact of the trade. Equating the move to that of the Hong Kong Monetary Authority in the mid-90s, when it bought over 10% of the domestic stock market, he said: "That similarly resulted in some substantial gains."

Jason Manolopoulos, managing partner at Dromeus Capital Management, who has lived in Russia for five years and runs an emerging market fund which invests in the CIS, said many observers were "mature enough" to realise the move was made out of political expediency rather than financial acuity.

But he added: "They have made a tidy profit. They bought equities when the market cap was around 10% of GDP. The markets were down by about 70-80% so to buy at that point was a very good thing to do."

The move represented not only good economic sense, but also a structural shift at a governmental level, he added. "Everything is very intertwined with politics," he said. "But now they are putting resources where the politicians think they should go. [Finance minister Alexei] Kudrin does not want money to be spent in corrupt infrastructure projects any more."

Pavel Teplukhin, chairman of Troika Dialog Asset Management, one of Russia's leading investment houses, also added: "The idea was because the prices were so depressed [that] it was a very good idea to use the Future Generations Fund to buy good, cheap companies."

In a further sign of the fund's move onto the world stage as a potential rival for other sovereign wealth funds, Moscow is awash with rumours that, through VEB, it is about to snap up 3% of UC Rusal, the aluminium conglomerate headed by Oleg Deripaska. Although its much-trailed $2bn IPO on the Hong Kong stock exchange has recently been delayed, Mr Teplukhin confirmed the rumour had gained common currency among Moscow traders. "This is exactly the purpose of the fund," he said.