UAIB: Performance of the Collective Investment Institutions in Q2 2015

Industry of collective investment institutions in the 2nd quarter of 2015 changed the dynamics in comparison with the first three months of the year - on separate parameters and in some sectors, although the general trend of growth was preserved.

Lateral, moderately pessimistic trend in the stock market that occurred in that time, lowered the yield of CII, and investors mainly left the market. At the same time, assets of venture CII continued to grow, and a number of venture funds was able to provide better results not only in comparison with negative rates of foreign currency deposits and other assets dependent on the rate of hryvnia to foreign currencies, and exceed the UX index, but also bring higher income than bank deposits in the national currency, and some of them– even compensated the very high inflation at that time.

The key trends of the Ukrainian co-investment industry in Q2 2015 were as follows:

• There was continued reduction in the number of AMC and funds under management, volume and the proportion of assets in securities in all sectors of CII (except open-ended ones), as well as in the number of investors in the market, - but also there was weakening of capital’s outflow from open-ended CII;
• growth of assets and NAV in venture and other closed-end CII in general continued,although at a slower pace than in the 1st quarter;
• growth of rates of return was changed by decline - in absolute terms, at the same time CIIs’ rates of return improved as compared to other areas of investment.

Number of AMC in April-June 2015, according to UAIB, decreased from 330 to 326 companies, at the same time several new AMC were created during the quarter.

Number of CII declined: the registered ones - from 1,563 to 1,556, and funds that reached compliance with the minimal asset volume standard - from 1,177 to 1,171. It was connected, mainly, with the dynamics of venture UIF (-10), while the sector of venture CIF was significantly expanded (+6).

Assets of CII in the 2-nd quarter of 2015 increased by UAH 3,842.96 mln. (+1.8%) and amounted to UAH 217,072.11 mln. as of 30.06.2015, including venture CII  - UAH 204,853.38 mln.

Venture funds provided 83% of increase, the rest was provided by other closed-end CII. Open-ended and interval funds were reduced, at that the latter sharply accelerated the reduction (together with exit from the market of two of these CII).

NAV  slowed its growth - the total net assets of all funds increased by UAH 3,337.20 mln. (+1.8%, after +2.8% in Q1), up to UAH 188,765 mln., venture ones  - by UAH 3,199.44 mln. (+1.83%, after +2.6%), up to UAH 177,603 mln.

The outflow of capital from open-ended CII during April-June was changed by inflow, but at last the net capital flow for the quarter was negative, although almost one fourth less than at the beginning of 2015 - -UAH 1.20 mln. This is 10 times less than a year ago. The number of funds with a net inflow of capital was not changed significantly, but their total indicator was twice as much as in the 1st quarter.

Investors of CII as a whole changed their attitude to the funds once again: their number in all sectors of CII declined, but the most significant such reduction in venture CII (except for the specific interval funds with mass small investors) by Ukrainian legal entities was accompanied by an increase in investments from this category of investors (ie their assets in these funds). Total investments in venture CII by all kinds of investors grew.

As a whole, as of 30.06.2015, domestic corporate investors had the greatest share in CII in terms of volume of assets; their share decreased for the quarter from 76.0% to 75.6%, while retail investors increased it from 6.2%  to 6.3.

The asset structure in the 2nd quarter of 2015, the same as before, experienced the decline in amount and proportion of assets in securities. But this time it concerned all sectors of CII, except open-ended ones. Fund’s instruments accounted for 23.8% in the aggregate portfolio of venture funds’ assets and 45.4% - in closed-end ones to 66.1% and 74.5% - in open-ended and interval funds. The share of "other" assets in venture CII increased from 70.3% to 72.1%.

CIIs’ rates of return generally decreased over the quarter in all sectors of CII by types and classes of assets. Closed-end (non-venture) CII with private emission led among the sectors by types of CII with an average surplus of certificates by 1.5%, after +2.3% in the 1-st quarter. Interval CII for the umpteenth time had the lowest average yield for the quarter (-3.3% after +2.4% in the 1-st quarter).

There were less funds, that had provided gains of investments in Q2 2015 –- from 5 out of 21 of interval ones to 11 out of 24 of open-ended and 44 closed-end (non-venture) CII with private issue, and to 19 out of 42 of closed-end CII with public issue.

Among diversified publicly offered CII by the classes of funds leadership passed to equity funds (+0.9% after +3.8% in the 1st quarter). The only bond fund also kept a positive rate of return, but it had fallen sharply in the quarter (+0.2% after +12.8%).

The rest of the classes showed a negative result in the 2nd quarter, although both among the mixed investment funds, as among the "other" diversified public funds there were those ones, that brought growth in the value of investors’ investments (7 out of 19 and 5 out of 13, respectively).

For the full report please see attachments below.