Would You Invest In A Russian Mutual Fund?

In an ambitious effort to seduce wary Russians into putting their huge savings somewhere other than under their mattresses, Russia is creating its first Western-style mutual funds.

The funds would channel Russians’ individual savings - estimated at $20 to $50 billion nationwide - into cashstrapped privatized companies, giving a much-needed boost to Russia’s ailing economy.

It will not be easy, however, to convince the average small investor.

“How do I know I won’t lose everything? Why should I trust the government any more than MMM?” pensioner Raisa Stepanova asked on Monday. The MMM investment fund bilked millions of Russians out of their savings in a well-publicized pyramid scheme last year.

Russia already has a large investment fund industry that sprang up with the big privatization auctions in 1992 and 1993. But those funds are almost totally unregulated, and investment has virtually stalled because of MMMtype scandals.