About why the future of the Russian financial market depends on retail investors and how their preferences have changed during the crisis, why does the market rely on ruble bonds and do management companies have a place in the pension money market, the CEO of Gazprombank-Asset Management “Alexey Antonyuk.
– Alexey, first of all I would like to clearly define what is your client base?
– From the point of view of collective investments and mutual funds, our clients are overwhelmingly individuals. In principle, these same people are clients of the bank from one or the other side and in the vast majority they have become our customers thanks to the network of the bank.
– How many assets do you have now?
– About 250 billion rubles.
– And what tools do you invest in order to generate income for your customers?
– We have quite conservative customers, we see that the most popular product among them is the mutual fund “Bonds Plus”.
This is a fairly conservative fund, which has low risks in terms of the overall risks of the financial market and provides a stable return. Accordingly, for our customers this is an alternative to a deposit. Rates on deposits are steadily declining, rates on the bond market are also declining, but due to this, the value of bonds is growing. Together, the yield of the bond fund exceeds the yield of deposits at comparable intervals and volumes.
– What is the profitability you provide to customers?
– We expect that we will earn profitability for the year at the level of 10%, maybe slightly more, but somewhere in this range, while the deposit rates are at the level of about 7-8%.
But we as responsible managers never promise profitability in figures. This is not correct, since any trust management carries investment risks, but our task is to build management at the expense of expertise and a proper investment process so that the probability of earning income is maximized. For us, the main benchmark is deposit rates, so that customers earn more than deposits.
– Are there those who prefer something more risky?
– Yes, but in the majority our client group is conservative and, as a rule, these are people who are not risk-averse in their investments, they save money for themselves or children for the future. Of course, they buy high-risk funds, but in comparison with the bond fund, many times less.
– What is your strategy for the coming years?
– There are two segments in business development, where we will focus. The first one is investment products for retail, individuals, as we see here the factor of reducing deposit rates, which will force the population to look at investment products. From January 1, 2018, the release of the personal income tax on bonds will come into effect, which will encourage citizens to invest even more in bonds. In addition, another very profitable story for retail investors is individual investment accounts (IIS). Now we are in the process of launching this product, we waited a while and watched the launch of IIS by other market participants and evaluated the demand for this product among our customers.
The second segment is investment products for wealthy private clients, since all of the above factors, except IIS, also occur for wealthy individuals. If we look at the natural alternative for investment, we will see that the real estate market has become stagnant in the last few years, and the demand for investment products is growing, including at the expense of those who anticipated investing in real estate, but now sees that the yield on them is lower , than on deposits.
– But you will agree that most people use IIS as a deposit, then to get a tax deduction.
– The problem of our financial market is that when people face profanity and are disappointed, they become lost to honest market participants. Practice, when investors simply put this money on the account and receive a deduction, is very beneficial for market participants who can use this money, but it is unprofitable for investors themselves. After two or three years, the client will understand that nothing has earned, except for this deduction. And if, conditionally his neighbor or colleague, has received both a deduction, and the investment income, then, naturally, a person can consider himself deceived.
Of course, conditions should be created so that when the money is on the account or are invested in one or two papers affiliated with the broker or the issuer’s manager, they were minimized. If the client has transferred money to the management, they need to be managed, the money must be invested. And then do not forget that the purpose of IIS was to attract the population’s money to the financial market, to develop the resource base of the financial market.
– Do you have a lot of wealthy clients?
– This is a fairly significant part of our business, the money is about $ 1 billion, there are not so many of them. We provide them with various investment products – complete trust management and investment consulting.
– Surely for wealthy clients who need to be qualified investors, can you offer a wider range of products lined outside of Russia?
– Including. To a greater extent, we offer eurobonds of Russian companies nominated in foreign currency, mainly in dollars, partly in euros. Logic is understandable – customers live and conduct business in Russia, read newspapers, understand which company represents what, what approximate credit risk and whether it is worth investing.
– How did the request of such clients change? What was it like before 2014, how has it changed during the crisis and what is happening now, when we can more or less call the current situation stable?
– The request of the client, who for the first time decided to start investment activity before the crisis, can be formulated as follows: I want high profitability and zero risk. And then we start the process of education – we explain to the client that high profitability does not happen without risk. If we can not explain, we make a decision not to develop relations with such a client, since it is already clear from the outset that we will not be able to meet its expectations and receive negative feedback. Fortunately, such cases are rare.
Therefore, further we find out with what level of risk the client is still ready to put up, how much he is ready to invest, what is the percentage of his fortune. Ideally, the client can invest in high-risk instruments no more than the amount, the loss of which does not affect his quality of life in the present or near future. I will explain by example: if a client who is about to retire early wants to invest 50% of his funds in shares, we will explain to the person for a long time that this is wrong, as the shares may drop sharply and his pension savings will suffer.
Before the crisis, in 2011-2013, the share of ruble investments was slightly higher, then due to the weakening of the ruble, customers sharply increased the share of foreign exchange investments. Due to the sharp drop in the markets in 2015, it was possible to buy quality bonds with a yield of 8-10% per annum in dollars, and this is a very high yield. Now the share of investments in foreign currency began to decline, but it is too early to talk about returning to the pre-crisis level.
The basic request we receive from clients now is conservative instruments, either with capital protection, or without capital protection, but with a low level of risk that would allow us to receive some kind of premium to bank deposits.
– And what will you offer further, when the eurobond will give only 2% per annum?
– Some already have such profitability. But there are Eurobonds, which now give investors 3.5-4%, and I would classify these papers as fairly conservative. If such tools do not attract the client, then we offered products with marginal leverage, structured deposits, i.e. deposits, the interest rate on which is tied to the change in the value of some selected underlying asset, all sorts of structural notes for various underlying assets.
But for now, we are betting on the further growth of the ruble bond market, whose price will grow as the key rate is lowered by the Bank of Russia. Based on the Central Bank’s inflation forecasts of 4%, and taking into account the statements of the regulator’s representatives about the target level of real interest rates of 2.5-3%, we expect that the key rate will be reduced to 7% in the course of time.
– How do you choose the bonds in which you want to invest?
– Our investment process is structured as follows: the entire list of issuers is taken, some filters are applied according to some criteria, that is, the availability of IFRS accounts, the credit rating, the volume of business, what kind of sector restrictions there may be. Relatively speaking, out of a thousand releases there are 150. These 150 are some kind of watch-list in which we choose individual instruments that we think will be shot. We look at how the issue is valued in the market and what our expectations for the company’s business are.
– And how do you plan to develop the corporate direction?
– As for the corporate direction, we see a great potential in structuring of assets, based on closed mutual funds (ZPIF). Last year, a new instruction came from the Central Bank, which brought a lot of innovations, in particular, appeared combined funds. It is a very flexible tool that allows management companies to develop and offer various solutions for asset owners and business owners, both in terms of optimizing ownership of assets, and in implementing projects, and in the part of making transactions with these assets.
The ZPIF mechanism provides additional protection of the assets and interests of the owner when making transactions with them. We think that in this direction the market will grow quite significantly. In our opinion, not everyone has tried the advantages of this change in the legislation, but we understand that this is a good potential. The growth in the number of ZPIFs and the value of their assets over a couple of years can be several times.
– You also manage pension money. What is your view of this part of the business taking into account not the most simple situation?
– In principle, the market is clearly formed here and we do not expect a large influx of pension money for objective reasons, and in principle there is not enough free pension money on the market for MC. At the same time, we see that, in general, the vector of legislation and the policy of the regulator is leading to the fact that pension funds will create their investment expertise, both in terms of portfolio management and in terms of risk management. And, ultimately, the need for the services of management companies for pension funds will decline.
– Whose retirement money do you manage?
– We have five APFs under management, of which four are regional. Among them there are such as NPF Khanty-Mansiysk, UMMC-Perspektiva, NPF Doverie, and others.
– There is an idea that NPFs can manage money themselves, not through the Criminal Code. What do you think about it? Is this a big piece of cake for you?
– For the past few years, there has been a steady trend towards the consolidation of the pension fund market, they merged, merged, groups were created. In these groups there are captive UK, which are sharpened in order to manage the money of only these funds. But on the other hand, the Central Bank is on the way to improving the quality and responsibility of pension funds to its customers. Now there is a discussion about the potential introduction of fiduciary responsibility for NPFs and in practice means the following: the fund must have its own investment expertise, that is, employ the staff of risk managers, managers and people who make investment decisions.
Now the situation is what? NPF delegates the management of the management company, but the responsibility is still borne by themselves. Thus, for NPFs this is a double cost: there is a team that monitors the situation on the market, decides on the allocation of limits for investing in certain instruments, but all this is managed by a third-party management company.
Everything goes to the fact that pension funds from the point of view of real portfolio management will increase their role and the Central Bank too is following the path that allows pension funds to take more and more part in managing their portfolio. In particular, representatives of the Bank of Russia heard statements that NPFs may begin to receive dealer licenses in 2017. Now, for example, NPFs in terms of reserves themselves can place deposits, acquire OFZ, in the future we expect that this will spread to savings. I think that not far off is the time when pension funds will themselves largely form a package of securities and manage it.
– In March, it became known that 71% of the preferred shares of Transneft were sold by UCP Ilya Shcherbovich investment group. Later it became known that Gazprombank – Asset Management owns a 53.57% stake in Transneft’s preferred shares through ZPIF Gazprombank-Financial. The shareholders of this fund are Transneft Invest (57.4%), Gazprombank Group (37.1%) and other investors (5.53%). Which structures of Gazprombank and what investors are the shareholders of this ZPIF?
“As a management company, we can not disclose our customers, I can only say that this is a group of financial investors who see the potential of the company and believe in the growth of its shareholder value.
– What profit do you intend to provide for this ZPIF?
– I can not talk about any specific figures here, as well as in relation to any other investments in such instruments, it is obvious that we expect the yield to be higher than the yield of the broad market in the comparable period.
– What is the meaning of this transaction for you? Who started the negotiations with you?
– I said the meaning of the deal above, speaking about the expectations of the growth in the value of securities, and regarding the second question, we are not ready to comment and disclose details of business negotiations.
– How do you feel about the idea of the Russian Direct Investment Fund to convert prefs into ordinary shares? What will it change for you and the shareholders of that ZPIF, which holds the bulk of the prefs?
– In my opinion, this is a good initiative, a similar step will increase the company’s shareholder value, which will benefit both investors in the company’s preferred shares, so the main shareholder is the state. It is important to note that this is a unique company, it is an infrastructure company, it is not exposed to external risks, and it shows good operating results and current profitability. We believe that investment in the company will bring high returns to our investors.
Interviewed by Marie Mesropyan
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