The Russian Government is considering hiring a foreign fund manager for a proposed oil-and-gas fund that it hopes will account, eventually, for 60 per cent of its GDP, or about $500 billion (£255 billion) at present estimates, a source at the Ministry of Finance told The Times.

It would be one of the biggest funds in the world. The Government has stowed $83 billion in petrodollars in its Stabilisation Fund, which the central bank manages and is invested entirely in AAA-rated US Treasury bills.

However, the ministry wants to take more risks with its money. It is proposing that the Government set up two new funds, including a reserve fund, accounting for 7 per cent to 10 per cent of GDP, which, a ministry source said would probably be managed by the central bank. However, it would be allowed to invest in all investment-grade assets. The fund would be used to manage oil price shocks.

The second fund would be a savings fund and, eventually, it would account for 60 per cent of GDP, according to sources. This fund could be dipped into by the Government. It would have a more aggressive risk profile and be allowed to invest in foreign equities, corporate debt and money-market instruments.

A source from the Ministry of Finance said: “We are considering who should manage this. It could be a foreign investment firm, the central bank or a state-owned bank.” The state-owned Vnesh-econombank (VEB) looks like a favourite to win the enormous mandate. Not to be confused with Vneshtorgbank (VTB), VEB is a Soviet-era state-owned bank whose original mandate was to manage the debt of the USSR. However, its ambitious management, led by Vladimir Dmitriev, its chief executive, is expanding its remit aggressively.

A botched reform process in 2003 meant that Russian citizens did not have the time or education to choose private fund managers for their state pensions, so about 95 per cent of pensions ended up being managed by VEB. Private fund managers, including Deutsche UFG and Raiffeisen Bank, were disappointed.

VEB has since put almost all the pension fund in Russian government bonds, so the state pension fund significantly underperforms privately managed pension funds. VEB is considered a Silovik bank, meaning that it has close ties to the Russian security services. It is thought to have covertly shifted federal money to the state-owned Rosneft in December 2004 to help it to acquire Yuganskneftegaz, Yukos’s main asset, in a controversial auction. The Kremlin denies that Rosneft used federal money to buy the asset.

VEB is also the favourite to become the new Russian development bank, which the Government wants to set up next year to help to renovate the country’s infrastructure via multibillion-dollar public- private partnership deals. And now it is favoured to manage what will be one of the biggest investment funds in the world.

A source at the Ministry of Finance said: “VEB manages the Government’s debt, so perhaps it should also invest the Government’s money. However, it has little experience of active investment management . . . The problem is that few private Russian fund managers have much experience, either. Only foreign managers have much experience.” Hiring foreign managers would be sensitive, but it would allay fears that the Government’s petrodollars could be misused.

Another option being considered is setting up a special agency to manage the fund, under the auspices of the central bank but employing a large team of professional investment managers, similar to what Norway did to manage its huge petrofund.

Capitalism at its finest

The Government has not decided who will manage the fund, but is considering holding tenders and accepting bids from foreign managers