Russian investment market in the first half of 2021

Summary

2020 updated previous records for the volume of funds raised from private investors. The total growth of retail funds and the segment of trust management of individuals' funds exceeded 600 billion rubles, and their share in the overall market structure reached 21%. The volume of the market for mutual trusts and collective investments, constrained by the weak dynamics of the largest segment - pension savings of non-state pension funds - at the end of 2021 grew by 13.8%, to 9.2 trillion rubles. In 2021, according to agency forecasts, the market volume will reach 10.3 trillion rubles due to the continued activity of retail and wealthy private investors.

At the end of 2021, according to the Expert RA rating agency, the market for management and collective investments reached 9.2 trillion rubles, an increase of 13.8%. The growth rate of market volume in the first half of 2021 (+5.2%) was significantly pressured by the weak result in the first quarter, associated with a decrease in the value of assets under management amid the collapse of stock markets. The results of the 2nd half of the year were significantly stronger: the market showed an increase of 8.2%.

The main contribution to the growth of market volumes in 2021 was made by funds from retail and wealthy private investors. In absolute terms, the largest increase was shown by individuals’ funds in IMUs (+341 billion rubles), significantly breaking the records of 2019 (+156 billion rubles) and 2018 (+147 billion rubles). The volume of the segment at the end of 2021 for the first time exceeded 1 trillion rubles. Open mutual funds added 209 billion rubles, while the total increase in assets of open mutual funds, BPIFs, and individual mutual investment funds amounted to 293 billion rubles, reaching 805 billion rubles.

In the second half of 2021, in connection with amendments to the Federal Law of November 29, 2001 No. 156-FZ “On Investment Funds,” management companies were given the opportunity to acquire, at the expense of property held in trust, investment shares of mutual funds, the trust management of which they carry out. At the end of 2021, the value of the net assets of own open mutual funds, individual mutual funds, and BPIFs purchased by management companies as part of the design of trust management strategies amounted to 78 billion rubles, at the end of 2020 - already 161 billion rubles. Thus, with the exception of the volume of shares purchased in the trust, the influx of new money from the market into open mutual funds, BPIFs, and individual mutual investment funds amounted to about 210 billion rubles.

Pension assets in 2021 cumulatively added only 237 billion rubles. At the same time, pension savings of NPFs showed the weakest absolute growth values ​​(+109 billion rubles) over the past 3 years (+272 billion rubles in 2019 and +166 billion rubles in 2018), losing ground to the pension reserves of NPFs (+128 billion rubles).

Table. The volume of the main segments of the market for remote control and collective investments at the end of 2021 and 2021

Source: "Expert RA"

The leadership in terms of growth rates was also secured by retail funds and trust management of funds of individuals. The segment of mutual funds is developing most actively, which grew more than 5 times in 2021 due to the continuing low base effect. Significant dynamics are demonstrated by the funds of individuals in individual mutual funds (+49.9%), open mutual funds (+45.4%) and individual mutual funds (+43.2%). The cumulative growth rate for the segments of open mutual funds, BPIFs, and individual mutual investment funds was 48.5%.

The weakest results are observed in the pension savings segments. At the end of 2021, the increase in pension savings of the Pension Fund of the Russian Federation amounted to only 0.4%, which was associated with negative dynamics in the 1st half of the year due to the termination of the trust agreement between the Pension Fund of the Russian Federation and one of the management companies and the transfer of funds to the expanded investment portfolio of the state manager. Excluding this movement of funds, the pension savings segment of the Pension Fund of the Russian Federation would show an annual increase of 8%. Pension savings of NPFs also show weak dynamics (+3.8%) against the backdrop of a decrease in investment returns compared to 2021, a lack of new money inflow and a decrease in the number of insured persons due to a significant proportion of people who receive a lump sum payment upon retirement. In the segment of pension reserves of NPFs, there is an accelerated dynamics (+11.7%), which is associated with the transfer of funds that were previously under the NPF’s own management to the trust management of the management company.

Against the backdrop of increased activity of private investors, the total share of retail funds and funds of individuals in private investment funds in the overall market structure reached 21% at the end of 2020, having increased by 6 percentage points over the year. Over the past 3 years, significant inflows of private capital have ensured the growth of the segment’s share IMU funds of individuals by 6 percentage points, up to 12%, and open mutual funds, BPIFs, IPIFs – by 5 percentage points, up to 9%. Pension assets, on the contrary, are losing ground significantly. In 2020, the share of pension savings of NPFs decreased to 33%, losing 3 percentage points, and over the last 3 years the reduction amounted to 7 percentage points. The total share of pension assets of NPFs at the end of 2021 dropped below 50%, to 47% of the market .

In 2021, according to agency forecasts, the volume of the remote control and collective investment market will reach 10.3 trillion rubles. The main source of new income to the market will remain funds from retail and wealthy private investors. The key rate of the Bank of Russia is at a historical low, which, in the context of maintaining a soft monetary policy and, as a consequence, low deposit rates, will continue to stimulate the demand of individuals for investment products with potentially higher income. The growth in the number of clients will be facilitated by the expansion of the product line of retail mutual funds (both exchange-traded and closed-end real estate funds), active promotion of management products by banks interested in receiving additional commissions, as well as the development of electronic sales channels and remote services. In addition, under the influence of a narrowing of the list of products available to unqualified investors, an additional influx of funds into management companies, primarily into mutual funds, is possible. The growth of assets of institutional clients of NPFs will be ensured exclusively through investment income. If the current pension legislation is maintained, there are practically no sources of new pension assets entering the market.

Prospects for the development of the investment market

Russia is a unique country. It is rich in colossal natural resources and powerful human potential. If we compare the current level of development of the domestic investment market with the 90s of the last century, we can state that our state has already made a huge step forward. Nevertheless, the Russian Federation has enormous untapped potential for the development of all spheres of the economy, including the investment market. The state must play a huge role in this process.

Direct investments require government support. We can highlight the following aspects: State support for direct investment consists of:

• legislative guarantees to ensure the activities of investors;
• the presence of one executive body that is authorized to represent the Russian Federation before Russian and foreign investors;
• creation and development of a system of preferences;
• providing reliable guarantees related to covering investment risks.

State support for investors should be aimed at creating a favorable investment climate in the country. Of course, this will have the best impact on the production of goods, works and services in the main sectors of the economy.

Along with achieving the goal stated above, other related issues will be resolved. These include:

• modernization of the existing production base, which will be facilitated by new technologies, know-how, and the emergence of modern equipment;
• implementation of a program to support Russian manufacturers;
• the formation of economic sectors working for import substitution;
• careful and efficient use of natural resources;
• increasing labor productivity;
• increasing the level of employment of the population;
• increasing the purchasing power of citizens;
• intensification of production.

It is impossible to overestimate the importance of the direct investment market for the development of the Russian economy. They are capable of providing not only its stabilization, but also its revival and upliftment.

Methodology

A review of the asset management market for 2021 was prepared by the Expert RA rating agency based on a survey of management companies.

To verify the accuracy of the data provided by companies, procedures are used to compare the requested indicators with the results of previous periods, as well as reconcile the information received with available available statistics, but the companies themselves are responsible for the accuracy of this information. In the process of processing data from questionnaires, individual indicators are correlated with the total for the company, as a result of which companies with uncharacteristic ratios are identified, from which clarifications and clarifications are requested.

The total volumes of funds under management are obtained as a result of summing up the value of net assets for individual areas of management. The net asset value of mutual funds was requested in accordance with reporting forms 0420502.

The graphs with the total volumes of the market for mutual funds and collective investments indicate estimates of the rating agency "Expert RA", obtained on the basis of the value of assets under management according to the questionnaires of companies that took part in the survey, and extrapolation of the results taking into account the assessment of the volumes of assets under management of companies that did not provide data. The remaining graphs and table are based on data provided by companies as part of the survey.

68 companies took part in the survey and provided data as of December 31, 2021. The total volume of assets managed by the review participants amounted to about 8.9 trillion rubles as of December 31, 2021, or about 96% of the market in monetary terms.

Citibank

Citibank has been operating in the Russian market for twenty-five years. This is one of the first international banks to appear in Russia. The largest investment company has huge capital and a large number of assets. Citibank is confidently among the ten most profitable banks. It is also part of the City Corporation, a global financial corporation that operates in more than one hundred and sixty countries. It represents a huge range of financial services and products, including banking services, securities brokerage operations and much more.

IR blacklist

Companies that I categorically do not recommend contacting:

• Alpha Intelligence;
• Cleverly;
• Dronax;
• Earn Tech;
• PaytUP;
• PrivateFX;
• Solar Invest;
• Sportvest;
• Why Not;
• WW-Exchange.

Of course, this blacklist is far from complete. Here is only a small part of online bookmakers that collect money from individuals but do not pay dividends. Next, I will tell you how to recognize scammers who lure clients’ funds supposedly for investment activities.

GKM Norilsk Nickel (GMKN)

The company's main revenue depends on the sale of palladium, nickel, copper and platinum. According to many analysts, prices for these metals will only rise.

On the other hand, the environmental scandal in which Norilsk Nickel became a participant had a negative impact on its image, and penalties from Rosprirodnadzor of 150 billion rubles dropped the quotes from 22,000 rubles to almost 18,000 rubles. Since then, the company's shares have been trading sideways at the level of 19,700 rubles.

But Norilsk Nickel is developing steadily, and the high price of the company’s products suggests that revenue will remain high. At the same time, the main shareholder of Norilsk Nickel, Rusal, is interested in high dividends.

The main risk for the company may be the environmental situation in Norilsk. Earlier, Speaker of the Federation Council Valentina Matvienko criticized the company’s actions and called for an understanding of the developing situation in the city. But nevertheless, it is appropriate to consider the company’s shares as a long-term investment.

BC 1x bet

BC "1x bet" is a brokerage company that has been operating on the Russian market for seven years. It offers a qualitatively new service and a huge selection of various sporting events to active fans. An innovative brokerage organization supports domestic sports and contributes to the creation of new entertainment areas. BC "1x Stavka" is also actively developing the bookmaker business on the Russian market.

Rating by clients

Moscow Exchange statistics, TOP 10 brokers

This rating shows the size of the brokers’ client base and how many of them make at least one transaction per month.

Data: December 2021 (no more recent data yet), MOEX

Number of clients

Total number of broker clients on Moscow Exchange

Active clients

Completed at least one transaction