BPIF, ETF and PIF: three forms of one idea

It is the wrappers that differ, not the ideas. In every case you buy a share in a pooled portfolio run by a professional manager, and in every case your share is called a unit or a fund share. Where these forms part ways is elsewhere: under which law the fund was set up, where the price of your holding is formed — in the exchange order book or in the management company's calculation — who is obliged to keep an exit open, and through whose custody chain your rights are recorded. These are the differences that decide what happens to you on a bad day, and these are what is worth checking before you buy — not the name of the product in the shop window.

Where the price is formed

This is the main difference, and the others follow from it.

A classic open-ended PIF has no price in the market sense at all. It has a calculated unit value: the fund's net asset value divided by the number of units issued. The management company calculates it at the end of the day, and an order to buy or redeem is executed at the value that will be calculated later — at the moment you submit the order, you do not know it. There is no order book and no counterparty; the units are literally issued and redeemed by the company itself or by its agents.

In an exchange-traded fund the price is formed in the order book, as it is for a stock. But behind the order book stands a mechanism that an ordinary stock does not have. The management company publishes an indicative net asset value per unit — iNAV, recalculated during the session at the current prices of the assets the fund holds. Under its agreement with the company, the market maker is obliged to keep two-sided quotes close to that value and to be present in the order book for a substantial part of the trading day. A primary market works in parallel: an authorised participant has the right to create and redeem units in large blocks against a basket of assets. If the exchange price moves above iNAV, it pays to create new units and sell them into the order book; if it falls below, to buy them up and redeem them. It is this arbitrage that pins the market price to the value of the contents.

That is why every feature of exchange pricing applies to an exchange-traded fund: different trading modes give different prices for one security, and the opening auction lives by its own rules — this is covered in detail in the article on trading modes.

Whose law and whose depository

A BPIF is a Russian construction: a unit investment fund set up under the law on investment funds, with a Russian management company, a Russian specialised depository that monitors the composition of the assets, and a Russian registrar.

An ETF in the strict sense is a foreign fund traded on a Russian venue under the rules for admitting foreign securities. Economically it resembles a BPIF; legally it does not: your rights to it are recorded through a chain of depositories that extends beyond the Russian perimeter. After 2022 this difference stopped being theoretical — restrictions in the upper links of the custody chain froze transactions in some of these securities. The availability of particular foreign funds has changed more than once since then, and the current list is better checked in the funds section than in articles.

Costs and taxes

The fees of the management company, the depository and the registrar are not debited from your account separately — they are deducted daily from the net asset value. You do not see them in your statement, but you always pay them, including in loss-making periods. Comparing funds by total expenses is valid only on an annual basis and only on the same base.

The tax difference in favour of the Russian form is more significant than it seems. A Russian PIF is not a payer of profit tax, so dividends from Russian issuers reach the fund without withholding at source and are reinvested in full. The foreign construction offers no such possibility: tax is withheld at source before the money reaches the fund. When a unit is sold, the investor's tax is calculated on 13%. If you are building a portfolio for the sake of payouts, compare the fund not with an abstraction but with buying the securities directly — the dates and amounts of the nearest payouts are in the dividend calendar.

What to check before buying

Step 1 — establish the form: whether it is exchange-traded or off-exchange, Russian or foreign. The name of the product does not tell you this; the trust management rules do.

Step 2 — compare the current quote with the published iNAV. A persistent premium means you are paying extra to get in.

Step 3 — look at the total expenses for the year and the composition of the assets. A "broad market" fund and a "sector index" fund behave differently regardless of the wrapper.

Step 4 — check how the exit works: through the order book, through redemption with the company, or both ways, and what the settlement periods are for each.

And separately: the unit price by itself tells you nothing about the quality of the fund — for exactly the same reason that the price of one share tells you nothing. A fund with a high unit price is not more expensive; it simply has a different denomination. For the values of the multiples and the list of constituent securities, see the stocks section, and for unfamiliar terms, the glossary.