UAIB: Performance of the Collective Investment Institutions in Q3 2016
During the 3rd quarter of 2016 international stock markets mostly recovered after the Great Britain’s referendum on Brexit, which initially provoked the opposite trends in key equity indexes in Europe and the USA, but did not prevent all of them to grow by the results of July-September.
Ukrainian indexes that continued to rise rapidly by double-digit growth rates in the optimistic environment, pushed up also the CIIs’ rates of return, especially of funds of open-ended type and equity funds. This occurred in a further narrowing of the stock market, but unaltered – for the first time this year - regulatory environment for funds’ and ACMs’ activities.
At a time when inflows to investment funds in the EU increased, Ukrainian open-ended CII for the first time in over 5 years broke the negative trend of capital’s flow and attracted additional funds from investors.
The following changeswere the key trends of Ukrainian industry of management of institutional investors in the 3-rd quarter of 2016:
Number of AMC, according to UAIB data, decreased from 304 to 300, at the same time two new companies were created in Kyiv again during the quarter.
The number of registered CII (total) as at 30.09.2016 increased from 1572 to 1601, and funds that have reached compliance with norms for the minimum amount of assets - dropped from 1135 to 1127. This again was due primarily to the dynamics of venture UIF (-14). Open-ended CII became less again by 3 funds (including one specialized fund). The last interval CIF was also closed, but venture ones became another 17 more.
Assets of CII that reached the standards accelerated the growth to +UAH 8,402 mln. (+3.4%, after +3.2% in the 2nd quarter) and as at 30.09.2016 amounted to UAH 253,609 mln., including venture funds – UAH 244,785 mln. (+4.0%). Increase of assets by the last ones compensated decrease in other closed-end CII - both with public and private issue (other than venture funds). In Q3 2016, growth of assets of open-ended CII accelerated significantly (+7.5%), and even more dramatic rise was recorded in the sector of interval funds (+13.5%).
NAV rose by slightly slower pace in all sectors, and in venture funds - almost three times weaker than the total assets, that testified emptive increasing of commitments by these funds as a whole. Total net assets increased by UAH 2,704 mln. (+1.3%, after +3.5%) and at the end of September amounted to UAH 212,407 mln., including venture CII - UAH 204,041 mln., opened-ended CII - UAH 58 mln.
Flow of capital in open-ended CII in the 3-rd quarter of 2016, for the first time during 21 quarter, was positive (+UAH 1.0 mln.), although in September the sector had net outflows. Annual outflows, the same as at early 2016, fell sharply - below UAH 1 mln.
Number of investors in CII generally continued to decline (-155, -0.1%). This concerned all sectors and categories of investors other than retail investors - citizens of Ukraine in open-ended funds, where their number grew, albeit symbolically, for the first time at least within two year (+3). There were totaly261,550 investors in all CII as at 30.09.2016.
Ukrainian legal entities as a whole remained the largest investors of CII,even further reduaction of their share in the aggregate NAV from 72.4% to 71.3% could not prevent it. They also still remained the key investors of venture CII (72.6%); individuals - residents led with the similar indicator in open-ended funds (72.7%). During the third quarter domestic enterprises reduced their investments in CII by less than UAH 9 mln. (after –UAH 2,141 mln. in Q2 2016), foreign enterprises - increased them by another UAH 2,412 mln, and citizens of Ukraine – by UAH 558 mln. Totally investors - residents as at 30.09.2016 had UAH 163 bln. in all CII, and non residents – UAH 41 bln. in all CII.
The structure of CIIs’ assets in July-September changed in the opposite direction in terms of investments in securities in all sectors, except venture funds: the share of financial instruments decreased. However, this redistribution of assets was held in conditions of continuing growth of the aggregate value of securities in all sectors of CII (except closed-end ones).
Venture funds continued to increase total investments in equities, although their share at the end of the quarter decreased slightly (+UAH 777 mln., 11.6% in assets). At the same time "other" assets increased here the most, that, as well as before, amounted to ¾ of their consolidated portfolio. Open-ended CII actively increased moneys, which share in the sector reached almost ¼, but equities remained the main part of assets here (39.2%).
As at 30.09.2016 securities in the aggregate portfolio of CII’ assets ranged from 21.5% in venture and 35.9% in other closed-end CII, to 69.2% - in open-ended and 73.9% - in interval CII.
CIIs’ rates of return for the 3rd quarter rose even higher - in all sectors, except for closed-end funds with private issue. Open-ended funds, which brought +6.6%, were again the most profitable by the average indicator of increase of value of investments (by types of CII), while equity funds (+14.1%) were again the best among diversified and specialized CII with public issue by classes of assets.
Open-ended CII (+12.0%) also were leaders by the rates of return since the beginning of 2016, and by classes of funds – they were bond funds (+10.0%). Bond funds kept the leadership by the annual yield (+16.9%) and closed-end funds with public issue had the highest score (+21.4%) among sectors by the types of CII.