Kirill Chernovol, Researcher at the Gaidar Institute’s International Best Practices Analysis Department, in a comment for Izvestia, assessed the prospects for the development of closed-end mutual funds (CEF) and the reasons for their growth amid the unstable situation on the stock market.
According to him, closed-end mutual funds, by their very nature, remain an instrument geared primarily toward corporate clients and wealthy investors. The expert believes that expanding tax incentives alone is not enough to make this product mainstream.
“Growth in demand is more likely to be driven by news of the high returns on closed-end mutual funds (about 93.2% over 5 years). However, a tax break alone does not turn closed-end mutual funds into a mass-market instrument,” noted Kirill Chernovol.
He recalled that investment tax deductions were originally introduced as a measure to stimulate asset turnover in the Russian financial market and to develop an international financial center. At the time, open-end mutual funds fit better into this logic, whereas closed-end funds initially occupied a narrower niche.
Kirill Chernovol also noted that for the instrument to truly reach the mass market, its accessibility would need to be radically improved. Currently, some CEF units are available only to qualified investors, and the mechanism itself involves a high minimum entry threshold and limited liquidity.
According to the Bank of Russia, in the first quarter of 2026, net inflows into CEFs totaled Rb453.7 bn with 72% coming from corporate funds and only 9% from retail funds. The average investment amount in retail CEFs was approximately Rb2.97 mn which also confirms the limited accessibility of this instrument to a broad range of investors.
When asked about the reasons for the growing popularity of CEFs amid problems in the stock market, Kirill Chernovol highlighted the role of real estate as a key asset for such funds. According to him, rising real estate prices and high borrowing costs are driving interest in collective investment structures.
“Real estate is one of the typical assets for CEFs, and in an environment of expensive loans, pooling investors’ funds becomes a more effective way to raise capital. Therefore, a significant portion of the inflows into such funds today comes from real estate, which further explains their steady demand even amid stock market volatility,” explained Kirill Chernovol.
He also noted that in the first quarter of 2026, the main inflow of funds into mass investment funds came from real estate funds. Investors choose them as a reliable asset. At the same time, the number of unit holders in such funds continues to grow—tens of thousands of people joined over the course of the quarter.