UAIB: Performance of the Collective Investment Institutions in Q1 2013

The Ukrainian stock market dynamics at the start of 2013 was differently directed, just as the performance results of the collective investment institutions industry. Prevailing downward pressure restrained positive tendencies of funds’ activities.

Key trends of the Ukrainian CII market in Q1 2013 confirmed changes in the traditional patterns of industry development and trends of preceding quarters. Among them should be noted a decrease in the number of market participants – AMC and funds that reached compliance with the standards; at a further growth of the industry’s aggregate assets – a drop of NAV in all its sectors; slowing down, almost to zero, of capital outflow from open-ended funds; growth of CII liquidity and rates of return in alll types and classes of funds.

Number of AMC in Q1 2013 decreased by five companies due to an exit from the market of ten companies in Kyiv and region. As of 31.03.2013, according to the UAIB, there were 348 asset management companies.

Number of registered CII continued to grow (up to 1570), although the number of CII that reached compliance with the minimal asset volume standard – decreased by 9 to 1213 – primarily with a quick decline of dynamics in the venture sector, where the quantity of recognized funds went down by 8. However, their share within the total number of CII remained at the level of 79.6%. Just as in the preceding quarter, one new open-ended fund added.

CII assets traditionally grew owing to venture funds: in aggregate – by UAH 1 126.60 mln (+0.7%) to UAH 158 327.73 mln., and those of venture CII – by UAH 2 216.41 mln. (+1.5%) up to UAH 148 128.71 mln., which broadened the latter’s share within assets to 93.4%.

NAV of funds, on the contrary, decreased, as venture sector asset growth took place owing to an increase in liabilities. An aggregate indicator declined by UAH 1 325.16 mln. (-1.0%) to UAH 137 935.42 mln., and the one of venture CII – by UAH 665.00 mln. (-0.5%) to UAH 128 833.42 mln.

Capital outflow from open-ended CII in Q1 slowed down from –UAH 9.83 mln. to –UAH 0.46 mln., at that, in March the first outflow over 21 month was registered. Just as before, an aggregate indicator of the sector was greatly affected by one fund. Nevertheless, net inflow to other open-ended CII demonstrated further growth – between 3 and 7 funds per month during the quarter attracted attritional investments, having received in aggregate UAH 7.42 mln. (after UAH 2.29 mln. in Q4 2012).

An outflow of non-residents’ investments from open-ended funds was going on as foreign capital continued exiting from the financial system of Ukraine. In the meantime, in venture funds, foreign entities’ contributions (in particular those of companies) grew significantly. National business entities, on the contrary, were decreasing their presence in venture CII. Citizens of Ukraine started investing actively into open-ended funds, not avoiding closed-end (particularly, venture) CII at that.

CII investors in Q1 2013, just as previously, were represented primarily by legal entities-residents (64.6% in CII, with exception of venture ones, and 77.5% – taking venture ones into account). Ukrainian citizens strengthened their leadership in open-ended funds (48.2% of NAV).

Asset structure in Q1 2013 in all CII sectors changed towards liquidity growth, with moneys on bank accounts growing both in absolute value terms and in relation to other components of CII aggregate portfolios by the types of funds. The value of investments held by funds in equities and OVDP was continuing to decrease in the main, and in “other” assets – to grow (with exception of venture funds). Open-ended CII reduced assets in corporate bonds.

On the whole, the share of securities narrowed in all sectors, with exception of venture CII, – to 52.3% in open-ended, 72.4% in interval, and 55.5% in closed-end funds, venture ones excluded. In the latter it broadened to 31.9%, and the greatest share therein still belonged to “other” assets – 63.2%.

Rates of return of CII notably increased over the first three months of 2013. The number of CII that ensured their securities’ value increase grew, in particular, among open-ended funds – to 20 from 41. Indicators of individual CII differed greatly: open-ended CII demonstrated between -39.1% and +30.5%, interval – between -7.2% and +85.1%, closed-end – between -43.2% and +196.6%. An average rate of return of open-ended funds went up to -0.1%, interval – to +6.2%, and of closed-end ones – went down to 2.5%. Not taking into account extreme values generated by some CII that were materially different from the rest of market indicators, an average growth of investments in all CII sectors (venture ones excluded) was within the range of -0.1% and +1.8%.

Among diversified publicly placed CII also all CII classes, based on asset structure, demonstrated an increase in the rates of return in Q1 2013. For instance, equity funds generated +1.7%, bond funds – +3.3%, hybrid funds – -2.2%, and other funds – +0.4%.