UAIB: Analytical Review of the Collective Investments Market in Ukraine in Q1 2017
In the 1-st quarter of 2017 the world's leading stock markets rose moderately in conditions of relative macroeconomic stability and generally positive investors’ expectations about movements of the global economy and its key markets.
Some positive changes in the economy and increased attention from international investors have contributed to the strong growth also of leading Ukrainian equities. Collective investment institutions that retained a significant part of the assets invested in the stock market, have received, as a result, higher returns, that has contributed to the competitiveness of funds with public issue, in particular, of open-ended CII and equity funds, along with other types of financial instruments and the most popular areas for investing of savings.
Investors of open-ended funds at this time preferred to fix profits or improved results from investing in them, while interval and closed-end funds with private placement actively attracted investors, that resulted in the recovering of fast industry’s growth. This was also facilitated by relatively stable conditions for the operations of funds and AMC during the first quarter of 2017.
The key trends of the asset management industry in Ukraine in the first quarter of 2017 were:
The number of AMC, according to the UAIB, remained at the level of 295 companies. At that, three new companies were created in Kyiv and Kharkiv during the quarter.
The number of registered CIIs (total) as at 31.03.2017 increased from 1,625 to 1,648, and of funds that reached the norm for minimum volume of assets - from 1,130 to 1,143. The growth of recognized funds was associated mainly with the dynamics of venture CIFs (+11). The number of open-ended CII decreased by one fund.
Assets of CII that reached the standards, returned to the upward dynamics and restored a significant part of the reduction for the previous quarter (+UAH 16,750 mln, +7.3%, after -9.2%). As at 31.03.2017, they amounted to UAH 246,938 mln., including venture funds - UAH 238,629 mln. (+7.4%, after -9.3%). At that, growth was observed in all sectors of CII.
NAV of all CII as a whole has risen by 8.6% in the first quarter of 2017 (after -11.3% in the 4th quarter of 2016) to UAH 204,530 mln., including of venture CII - UAH 196,592 mln., of open-ended ones – UAH 61.0 mln. At that, the increase of NAV of closed-end CII (including venture funds) was faster than the increase of total assets, so, funds, as whole, reduced the leverage (the share of borrowed funds in the structure of assets) for the quarter.
Movement of capital in open-ended CII in the first quarter of 2017 was negative for the second time in a row and accelerated to –UAH 1.4 mln., and annual - to –UAH 2.2 mln. At the same time, as before, there were several funds, which attracted additional capital at this time.
The number of CII investors in January-March of 2017 increased rapidly (+7,242, +2.8%, after
-0.06% in the 4th quarter of 2016) – interval and closed-end funds with public issue were demanded by Ukrainian citizens, and venture CII - by foreign enterprises. In open-ended funds, the number of depositors decreased insignificantly both for the quarter and for the year (-7, -0.4%, and -58, -3.3%). In total, as at 31.03.2017, there were 268,526 investors in CII, of which 96.6% were retail investors - residents of Ukraine.
The largest investors of CII (by share of NAV) as a whole remained Ukrainian legal entities, which significantly increased their investments during January-March of 2017 and expanded their share in total net assets of the market from 68.4% to 69.1%. In venture funds, their weight increased from 69.9% to 70.7%. In open-ended funds, despite some reduction, individuals-residents led (73.3%, after 73.6%).
CII asset structure in the 1-st quarter of 2017 showed a movement towards increasing of the aggregate value of investments in securities in all sectors and their weight - in open-ended, interval and closed-end CII with a public offer. The same dynamics was characteristic, in particular, also for equities in CII assets. As at 31.03.2017, in the aggregated portfolio of CII assets, securities amounted from 20.7% and 30.6% in venture and other closed-end CII with private issue to 68.9% and 75.2% in open-ended and interval CII.
Venture funds increased aggregate investments in equities, after a reduction at the end of 2016, although they did not return them to the level of the 3rd quarter of last year. Much more rapid growth of "other" assets in the sector reduced the weight of equities and increased the share of the first ones from 74.3% to 74.9%.
Open-ended CII insignificantly increased the amount of assets in banks, that, against the backdrop of dynamic growth of the consolidated portfolio of equities, narrowed the share of the first ones from 24.8% to 24.5%. Equities accounted for almost 42% of the sector's assets (after 36.6% at the beginning of the year).
CIIs’ rates of return for the first quarter of 2017 rose in almost all sectors (except for closed-end non-venture CII with private issue and bond funds). Open-ended funds were the most profitable in terms of average indicator of value of investments’ increase (by types of CII) - +10.2% (after +1.8% in the 4th quarter of 2016), and among diversified and specialized CII with a public offer (by asset classes) - again equity funds (+15.7%, after +11.8%).
Open-ended CII also remained the leaders by rates of return for the year (+25.1%), and equity funds were leading by fund classes in terms of the annual performance (+64.5%).
In the 1st quarter of 2017, growth of assets of pension funds and insurance companies under management continued (+5.8% and +27.3%, respectively), with an unchanged number of market participants (AMC, NPF and IC).