UAIB Analytical Review of the Asset Management Market in Ukraine in 2013
In 2013 the asset management industry in Ukraine as a whole continued to grow both quantitatively and in terms of assets’ volume and rates of return. But a number of negative trends observed in the previous year continued.
Unlike key world stock indicators, the Ukrainian indexes over this year lost even more in a value, but were in a trend with emerging markets, which also experienced outflows of capital. And although a sharp socio-political situation in Ukraine in the last months of the year did not stipulate falling of «blue chips» of domestic stock market, investors’ exit from CII prevailed the third year in raw. While in open-ended funds net outflow was at the same level as in 2012, excluding funds that left the market and settled up with investors, in venture ones it increased, at that, it were non-residents that mostly left this sector.
Over the year, the number of asset management companies that exit from business, exceeded the openings of new ones, and the total number of market’s participants declined for the first time since 2010.
Collective investment institutions, however, became more – both in total quantity and in number of those that reached compliance with minimal assets value standard. Only the sector of venture funds expanded, however, the growth here was also slowed twice compared to 2012. The sectors of open-ended and interval UIF and closed-end non-venture CII at the end of 2013 covered a smaller number of funds. For open-ended funds this was the second year of reduction, for interval and closed-end ones– the third one.
The aggregate net assets of all CII in 2013 almost doubled reduced growth, and venture funds again were the engine of growth.
During the year, the aggregate net outflow of capital from open-ended CII was fixed monthly, except March, and, however, for the year results it declined slightly, although did not lose its importance in reducing the sector’s NAV. The greatest losses from investors’ exit were experienced by balanced, conservative funds, including also money market ones. These funds, however, were the leaders by the annual rate of return.
As a whole, 2013 was marked for the collective investments market by positive developments in the form of increased rates of return, particularly in non-venture investment funds. More than one-third of open-ended CII provided the rising value of contributors’ investments, while a year ago there were less than a quarter. Nearly half of closed-end and interval CII had also a positive yield. In general, the number of public (non-venture) funds could compete with bank deposits by rates or return in 2013.
Inthemarketofnon-statepensionfunds’ assetmanagement2013 passed by the downward dynamics, in contrast to the previous year. The number of AMC which managed NPF assets, as well as the number of NPF themselves and value of their assets under management decreased, at that, assets declined for the first time in 9 years. Open NPF remained the largest segment, which held more than 3/4 of the market by the number of funds and 2/3 by assets under management.
Insurance companies with assets under management also became fewer in 2013, and their total assets in AMC service dropped 3 times due to complete closure of business by the company, that had the most volume of IC assets under management during the year.
In 2013 the market of institutional investors’ asset management was tested by the changes of legislation, in particular with regard to tax and depositary systems, and also licensing conditions for companies’ activity. While some changes limited AMC possibilities and restrained the growth, other ones, though were difficult, however in mid- and long term perspectives can increase the efficiency of companies’ and funds’ performance.
Inuring at the beginning of 2014 of the new Law "On CII", designed to enhance the ability to work in the collective investments’ market and bring its conditions closer to those, that exist in the developed globe markets, will stimulate the emergence of new types of funds, that will satisfy betterthe investors’needs. At the same time, success here will largerly depend on developments in the stock market as a whole, in particular in the topics concerning increasing the number and improving the quality of the issuers, securities of which are traded on the stock exchanges, in particular are in the listing. It is also necessary to preserve the current regime of tax treatment of CII and investors’ income.
Formation of the effective three-level pension system is also impossible without sustained economic growth and stock market’s development for ensuringthe wide possibilities for effective management of pension assets. Having led a decade ago in the legislationthe mechanism of creation and development of the funded pillar component of the pension system, which is generally in line with EU guidelines, Ukraine is still waiting for political changes that would finally give a push to implementation of the second (state) accumulation level of the pension system.
Political instability, economic decline and the need for fundamental structural reforms will further complicate the conditions for AMC activities in Ukraine during next year. The market of assets management will face new challenges in the form of new government’s legislative initiatives, which, however, can also give a push for the long-waited high-quality growth of market. This will facilitated also by increase of foreign investors’ interest and trust to Ukraine.
For more details on AMC and CII performance in 2013 please see attachments below and also the Analytical Review of the Collective Investments Market in Q4 2013
For enquiries please contact: Anastasiia Gavryliuk (Senior analyst & International Relations Coordinator) – gavrylyuk@uaib.com.ua.