UAIB Analytical Review of the Collective Investments Market in Ukraine Q4 2015 & Full 2015
Reduction in the total number of participants in the market of asset management industry in Ukraine - both AMC, as well as funds under management and their investors, continued the second year in row. And despite all the difficulties, in 2015 the industry continued to grow.
The number of asset management companies in 2015 decreased from 336 to 313.
The number of collective investment institutions - as those, that reached complience with the minimum asset value, as well as registered ones (presenting in USRJII) –decreased, so the trend of last year was preserved. In 2015, the reduction affected not only the sectors of open–ended (the 4th year running), interval and closed-end CII (the 5th consecutive year), and all public CII in general, but also venture funds (at that, the number of venture CIF increased significantly).
The total assets under management and net assets of CII in 2015 showed rates of growth similar to those in 2014 - this time only at expence of venture funds. Absolute growth of assets increased in 2015 almost by 1.5, NAV’s - was the same, but relative growth for both indicators decreased slightly due to a larger base for comparison, but, however, remained double -digit (over 10%). As of 12.31.2015, assets of the industry exceeded UAH 236 bln., net assets - were nearly UAH 200 bln.
CII with public issue, in particular, open-ended and equity funds, continued to suffer losses from the stock market’s decline and capital’s outflows. In the sector of open-ended CII the latter lasted for 4.5 years, although in 2015 it weakened significantly and was virtually absent at the end of the year. Some more open-ended funds left the market during the year, and a new CII of this type was created last time back in 2012. One new specialized fund (bank metals) with public issue entered the market in 2015.
At the same time, trend of increasing assets of venture CII was also kept, though their number as a whole decreased in 2015, despite the emergence of a number of new funds in this category. Therefore, the concentration of the market continued to grow. Absolute growth of sector’s assets was equal to the indicators of 2013-14.
Investors reduced their presence in CII during 2015 - their number decreased significantly in all sectors, except for the individual investors in venture CII, whose number increased in the 4th quarter and for the year as a whole.
At the same time, investors’ inputs in CII in 2015 increased - primarily due to domestic enterprises, which provided half of the increase, as well as to citizens of Ukraine and foreign investors – legal entities. Investors of different categories focused their attention mainly on venture funds and other closed-end CII (except for legal entities-residents). Foreign enterprises also increased the amount of their assets in interval funds.
Share in CII assets, which was owned by non-residents (mostly legal persons) in 2015 increased to 18.6%, and their total investments increased more than in 2014 .
CII rates of return in 2015 generally decreased: for open-ended CII an average indicator found itself in the negative zone (after double-digit growth in 2014); for interval - remained above zero, but decreased more than double; for closed-end - in 2.5 times, at that, closed-end funds with public issue showed an average significantly better results than funds with privateissue.
Almost half of funds among open-ended CII provided growth in the value of investors’ investments in 2015. Almost all open-ended CII had rates of return for 2015 above the UX index, and almost a quarter - more than the deposits in Hryvnia.
Among diversified CII with public issue positive results this year were obtained, in particular, by bond funds, which also made competition by yield for deposits in local currency. Although the average rate of return of equity funds was negative in 2015, but decrease in the value of their securities was more than by tripled restrained than the UX index.
Private pension funds’ asset management in 2015 continued to grow in terms of volumes of NPF assets under management, while the number of funds decreased. Open NPF remained the largest segment in aspects of value and quantity, their share even slightly increased for the year. NPF assets, the same as before, were invested mostly in securities (mainly in OVDP, while assets of professional NPF - in corporate bonds and equities) and in deposits at banks. Despite of securities’ volume increase in each of three sectors of pension funds, the weight of stock instruments in assets increased only in the corporate NPF.
Number of insurance companies with assets under management in 2015, unlike the previous year, became fewer – the same as for AMC which managed such assets. The total value of IC assets under management in annual volume continued to grow, but more slowly than a year ago.
In view of above mentioned difficulties, that befell participants of the securities’ market and asset management industry in 2015, among which, in particular, there was introduction of new, significantly more stringent requirements as for issuers, as well as for professional participants, including AMC, for further it is possible the substantial reduction of their number and assets under their management in 2016. Industry’s participants expect that business environment will be even more complicated both in 2016, and in the medium term.
Among the expected changes in the regulations of the market – there is further activation of introducing norms of European law by regulator in the context of implementation of the Agreement on Association with the EU, in part of financial markets, including requirements for securities and issuers, stock exchanges (regulated markets) and professional participants (listing and prudance supervision), in particular, for AMC. The most painful this process will be for CII with public issue, and also for NPF. However, market participants hope that the regulator will take into account the Ukrainian realities and will strengthen requirements for capital and activity of market participants gradually (over several years), as it is envisaged by European practice.
Industry of asset management counts also on enlarging of the range of high-quality securities and derivatives in the market, available for investments institutional investors, implementation of legally provided opportunity to invest in foreign assets through corporate and sovereign instruments, as well as on needed for that liberalization of stock and currency markets, providing mechanisms for risks hedging, and improving the infrastructure of the stock market.
For the full report, please see attachments below.