Sber Asset Management first in Russia to launch smart funds

Jun 08, 2021

Sber Asset Management and SberCIB have launched five innovative smart exchange-traded funds on MOEX. A key feature of smart funds is that they can be personalized depending on the investor’s yield and risk expectations. Clients can invest in smart funds through the SberInvestor app or any Russian broker. Shares cost RUB 10[1].

Each smart fund corresponds to a specific risk level:

  • Sber – conservative smart fund[2].
  • Sber – prudent smart fund[3].
  • Sber – balanced smart fund[4].
  • Sber – progressive smart fund[5].
  • Sber – dynamic smart fund[6].

Any person, regardless of their knowledge of the stock market, can choose a fund that corresponds to their goals and risk level. Fund portfolios are composed according to the following principle: maximizing expected yield within the selected risk level.

The new smart funds are exchange-traded funds (ETFs). They follow[7] the structure of special smart indices that represent a readymade set of securities. They were developed based on the Sberbank CIB index platform. The hybrid indices include several stock share indices at various ratios depending on the risk profile. E.g., Balanced Smart Index, linked to the balanced smart fund, currently consists of 40% securities on the MOEX Index, 30% securities on the MOEX Corporate Bond Index, and another 30% money market instrument securities.

Each smart fund invests in a wide variety of securities (from several dozen to several hundred), including shares and bonds, securities issued by companies from a number of countries, ruble and dollar securities, as well as state and corporate securities[8]. The indices and smart funds are rebalanced on a quarterly basis.

The concept of smart funds implies a shift to a fundamentally different level of interaction between people and the stock market. It is the first time an investment product has been so easy to understand and to use. There are no difficulties or nuances to take into account when establishing a portfolio, comparing and studying instruments, or rebalancing – all this happens within the smart funds. In order to make it completely clear to everyone what the potential yield-risk ratio is for each fund, we calculate three potential yield scenarios (positive, neutral, and negative) and publish the potential decrease range. It is even faster to choose which fund suits this or that person than it is to invest. All it takes is a couple of clicks in the SberInvestor app.

Igor Mamontov

Vice President, Director of Investments and Savings, Sberbank

Yield scenarios and potential decreases

There are three scenarios: positive, neutral (the most likely), and negative. They are calculated using the asset price history from the index, compared to the exchange-traded mutual fund management results. Yield figures for a specific period of time are used to calculate the scenarios: the neutral scenario uses the median figure, the positive scenario uses 10% of the highest figures, and the negative scenario uses 10% of the lowest figures.

Balanced Smart Fund’s average annual yield for a period of three years in a neutral scenario amounts to 10%, 16.3% in a positive scenario, and 3.8% in a negative scenario. In the case of stress or crisis events on the stock market, the decrease in an exchange-traded fund’s asset prices could amount to 20%[9]. Scenarios cannot be considered a guarantee or benchmark for investment yield. SberBank Online also offers a special survey that helps clients navigate their investment profile.

Tax breaks

When it comes to taxes, it is more efficient to use smart funds rather than establish a portfolio by yourself. When rebalancing their portfolio, investors must sell a portion of the assets in the portfolio. If these assets appreciated in value, the investor must pay taxes on them. In smart funds, rebalancing takes place within the fund itself, meaning that the fund owner does not have to pay taxes on assets that appreciated in price. Taxes are paid only when the investor sells fund shares and receives a profit.

When an investor has owned a smart fund for over three years, they are exempted from income tax (the maximum profit exempted from personal income tax is RUB 3 mn per year).

[1]Share prices upon establishment of fund indicated.

[2]BPIF RFI Sber – conservative smart-fund

[3]BPIF RFI Sber – prudent smart fund

[4]BPIF RFI Sber – balanced smart fund

[5]BPIF RFI Sber – progressive smart fund

[6]BPIF RFI Sber – dynamic smart fund

[7] “A deviation of no more than 5% per day of changes in the selling price for one ETF investment share compared to changes in qualitative index figures is possible.”

[8]Clients can invest in securities by purchasing ETF shares.

[9]The potential ETF asset price decrease level in stress market conditions is indicated. Depending on the market situation, reductions could be greater.