UAIB: Performance of the Collective Investment Institutions in Q2 2014
In Q2 2014 collective investment industry together with the whole country experienced difficult times, but in most aspects retained the positive dynamics of its indicators.
The main trends of the Ukrainian CII market in April-June 2014 were as follows: further reduction in the number of AMC and the total number of funds - both registered and those that reached compliance with the minimal asset volume standard; growth of assets under management due to venture CII; slowdown of capital’s outflows from open – ended CII with the unchanged number of operating funds; increase in the proportion of securities in the CII’ portfolios, mainly due to the growth of assets in equities; moderate increase of rates of return in most sectors of CII by types and classes of funds.
The number of AMC in Q2 2014, according to the UAIB data, decreased to 340 companies, although 2 new AMC were created during the quarter.
The number of registered CII at the end of the quarter also became less again – by 6 – to 1591 funds, and the number of CII, that reached compliance with the minimal asset volume standard decreased by 10 funds, to 1233 ones. This was mainly due to the dynamics of closed-end CII (-9), including venture capital CIF (-3).
As of 30.06.2014, in the state of liquidation there were 5 open-ended, 4 interval, 21 closed-end non-diversified and 24 venture CII.
The assets of CII in Q2 2014 grew only in the sector of venture capital funds and amounted to UAH 199 919 mln., venture ones – UAH 189 935 mln. The growth of total assets of all CII increased by half to UAH 12 802 mln. (+6.8%), while in venture funds – up to UAH 12 175 mln. (+7.5%).
NAV dynamics of open-ended, interval and closed-end non-venture CII was less negative compared with total assets’ one, and of venture ones – more restrained. Total net assets increased by UAH 9 592 mln. (+5.8%) to UAH 175 643 mln., venture ones – by UAH 9 890 mln. to UAH 166 610 mln.
The capital outflow from the open-ended CII during April-June 2014 slowed down to UAH 12 mln., and in annual terms was stabilized at around UAH 62 mln. In conditions of a long-term narrowing of the sector the role of outflows continued to grow and was decisive in the direction of change of the total NAV. Traditionally there was a significant impact on the aggregate indicator of the sector by capital’s movements in one or several funds – mostly the same as in the previous quarters. At that, the number of open-ended funds with net monthly inflows, though it was slight, doubled – up to 5-8 funds– as well as their cumulative additional income (UAH 1 mln.)
Investors of CII in Q2 2014, in general, increased their investments in CII, at that, unlike the previous three months, the citizens of Ukraine even increased their investments in open-ended funds, and foreign companies – in venture ones. However, Ukrainian legal entities still remained to be the engine of the industry. And if the reduction of their aggregate investments in open-ended funds accelerated by more than 65%, then in venture funds, otherwise, the assets’ growth was 65% more at the expense of these investors.
Totally, as of 30.06.2014, domestic institutional investors had the main share in CII in terms of volumes of investments (79%), while natural persons – residents had it in open-ended CII (61%). The share of Ukrainian citizens in NAV of all CII in Q2 2014 fell from 6.2% to 5.6%, as their total investments decreased in the sector of closed-end non-venture funds, despite increasing investments in open-ended and venture ones.
The asset structure in Q2 2014 showed, mainly, increase in equities rates in this time – their share, and, along with them, the share of securities in the CII portfolios of all sectors increased. In aggregate assets of interval funds equities’ share was relatively the most – 68%, and in open-ended and closed-end ones – 32% and 36% respectively. In venture CII assets in equities and securities in general increased also, but “other” assets remained to be the largest part in the portfolio of this sector with almost the same proportion (about 68%).
In monetary terms, CII’s investments in equity instruments, respectively, increased also: by the end of Q2 2014 funds held in equities UAH 3 974 mln. more (i.e. UAH 27 473 mln.), and in all securities together – by UAH 3 658 mln. ( UAH 57 973 mln). Total investments in promissory notes grew significantly by UAH 737 mln. to UAH 18 310 mln.) due to venture CII, while assets in corporate bonds decreased significantly in both sectors of closed-end CII. In all funds together they became less by UAH 218 mln. (UAH 11 791 mln.) “Other” assets in venture CII again were the main engine of growth (+ UAH 8 601 mln.), in all funds - + UAH 9 402 mln.
The rates of return of CII for the quarter in general increased again in all sectors, except open-ended one (by average indicator). However, among all types of CII the number of funds that had positive rates of return, dominated: among open-ended funds – 22 from 31, interval ones – up to 15 from 28, closed-end non-venture funds– up to 50 from 96.
An average rate of return in the sector of open-ended CIIcomprised +5.7% with the range of results of separate funds between -4.7% and +20.0%. Interval funds significantly increased the average indicator – to +4.9% (all of them were in the range of -15.3% to +71.2%). Closed-end CII provided on average +8.6% (from -51.8% to +299.6%).
Among the classes of diversified CII with public issue the leaders in Q2 2014 were equity funds (+10.2%, after + 6.8% in Q1). Mixed (hybrid) investment funds also showed competitive +5.2% for the quarter, and “other” funds - +1.8%. As of 30.06.2014, there were no bond and money market funds according to the criteria based on the actual structure of assets.
CII rates of return from the beginning 0f 2014 amounted from +6.6% in interval CII and +8.1% in diversified hybrid funds to 13.2% in open-ended and 13.3% in closed-end CII, and 17.6% in diversified equity funds.