UAIB: Performance of the Collective Investment Institutions in Q4 2012

The way the situation in the stock market of Ukraine was developing in Q4 2012 was not favorable for the majority of public, specifically open-ended and interval investment funds, but did not prevent a further growth of closed-end collective investment institutions, in particular, venture CII.

As a negative impact of the dynamics of stock market indicators intensified, the key trends of Ukrainian CII market in Q4 2012 somewhat weakened compared to Q3: increase of the number of AMC and CII and asset value under management continued, but was concentrated mainly in the venture sector; in the meanwhile, an outflow of capital from open-ended funds increased; in open-ended CII continued, and in the rest of sectors resumed a decrease in the assets in securities, in particular, in equities; an average rate of return of open-ended funds declined, though the one of closed-end ones – went up.

The number of AMC in Q4, with expected strengthening of the regulatory requirements to entering the market, grew faster than in the preceding quarter – by 9 companies, and turned out to be the highest during the year (353 AMC). The pace of increase of the number of registered, as well as recognized, CII   accelerated due to venture funds that comprised 79.6% of all CII. Entering the market by one open-ended fund as such that reached compliance with the standards could be regarded as a positive move.

The assets and NAV of CII, just as in Q3, during the last three months of 2012 grew owing to an entire sector of closed-end funds. Over Q4, an aggregate asset value of all CII increased by UAH 14 978.16 mln., having sped up growth from +3.9% to +10.5%, and as of 31.12.2012 reached UAH 157 201.12 mln. The net asset value comprised UAH 139 260.58 mln. (+UAH 12 556.83 mln, +9.9% vs +4.9% in Q3). The share of venture funds within the market NAV grew up to 93%.

Capital outflow from open-ended CII in October-December accelerated from UAH 7.59 mln. to UAH 9.83 mln., having approached Q2 indicator when the stock market dropped by 32%. Aggregate sector NAV decrease accelerated as well – from UAH 6.31 mln. to UAH 19.18 mln. At that, a significant share of one fund within the aggregate outflow (during Q4 – about 45%) could be regarded as a relatively positive factor here. Furthermore, net inflow into several other open-ended CII further increased – from UAH 1.47 mln. in Q3 to UAH 2.29 mln. in Q4.

The investors of CII in Q4 2012, just as previously, consisted mainly of legal entities-residents (69.2% in CII, with exception of venture funds, and 80.0% – venture funds included). They remained primary investors in all CII sectors, with exception of open-ended ones (42.5%). In the latter, under conditions of capital outflow, the share of the key investors – citizens of Ukraine – somewhat narrowed (up to 46.4%), and so did the share of foreign companies (up to 11.0%). Investments of natural persons-residents continued to grow in closed-end and, particularly, venture CII (up to 23.1% and 2.35% respectively). Finally, the share of Ukrainian citizens within CII on the whole grew to almost 3.9%. Non-residents increased their presence solely in venture funds (up to 16.8%), which brought to an increase of their share within the aggregate CII NAV up to 16.1%.

The asset structure. The value of assets held in equities in October-December declined in open-ended and interval funds, and grew in closed-end ones. Simultaneously, these securities’ share within asset structure narrowed in all CII sectors, with exception of interval ones, where investments into government and corporate bonds decreased more. A decrease also occurred in the assets held by open-ended and closed-end (with exception of venture ones) CII in corporate debt securities, and by closed-end (including venture ones) funds – in domestic government bonds.  

Venture CII also notably decreased volumes of investments in promissory notes, and, in the meantime, increased – in equities, corporate bonds and “other” assets.

All in all, as of 31.12.2012, securities comprised between 31.2% in venture and 55.7% in open-ended CII, and up to 74.8% – in interval ones. Moneys and bank deposits in open-ended funds grew up to 30.5%.

The rates of return of CII, and public funds in particular, in Q4 2012 were heavily affected by mostly downward stock market dynamics. The number of CII that ensured growth of their securities’ value  decreased, at that, the greatest decrease occurred among open-ended funds (15 out of 40, or 37.5% after 67.5% in Q3). Rates of return varied greatly even within the same sector: open-ended CII demonstrated between -49.0% and +13.1%, interval – between -55.3% and +22.1%, closed-end – between -54.3% and +370.7%. Finally, on average, open-ended funds’ securities got 4.5% cheaper, and interval ones’ – 2.0% cheaper, whilst closed-end ones – added 5.9% in value. At that, not taking in consideration extreme values of some CII that differed significantly from the rest of market indicators, an average rate of return for all CII sectors (with exception of venture ones) ranged between -1% and 0%.

Among CII classes by asset structure, equity funds in Q4 demonstrated -8.9%, bond funds – +1.3%, hybrid funds – -5.0%, and other funds – -2.4%. Since the beginning of 2012, average losses in open-ended CII reached -12.6%, in interval – -12.1%, and in closed-end ones – -2.8%, which is at least three times higher than the national equity indexes’ performance.