Monitoring management companies’ activity, 2007, the second quarter

Over trillion / Leader has remained in the lead

Combined net assets of management companies engaged in monitoring in the second quarter of 2007 neared 1.2 trln rubles. The monitoring has covered 81 management companies (according to Expert RA, about 85% of the market), therefore in the first half of the year combined managed assets amounted to 1.4 trln rubles, which is 70% above the similar indicator (NAV) in 2006. The market of trust management has been very dynamic — in the first half of 2007 net asset value (NAV) increased by 27%.

“The second quarter was not too successful for the Russian stock market, — says Pavel Samiev, Expert RA, a director of a department of rating financial institutions. — After the eight quarters of constant growth the market has slowed down in the first quarter of 2007, and then even sagged. Main “failures” of the second quarter followed placements of Sberbank and VTB and were brought by winds from the East (narrowed capitalization at the Asian markets). Therefore some companies — among the asset management leaders - lost their ground or at least made no moves forward. Besides, when leaders accumulate assets in management, they lose their flexibility and have problems with ensuring high profits for their clients.

We expect some acceleration of the market growth in the autumn, if the American stock market does not strengthen its negative influence. By the end of the year the volume of assets in management (NAV) of all the management companies may reach 1.7 trln rubles”.

Individual trust funds - 17% Mutual funds - 41% Pension reserves NPF - 33% Pension accruals from NPF - 2% Pension accruals from PFR - 1% Insurers' reserves - 6%

The share of mutual funds and NPF has still been about 74% of the total market: 41% and 33% accordingly. Only pension accumulations from NPF and Pension Fund of the Russian Federation (PFRF) have shown some visible growth: NPF's share increased from 0.4 to 2%, PFRF's share - from 0.6% to 1%. The situation might possibly be influenced by the pension reform. Despite unsatisfactory result of the reform and failed expectations, one can see some changes for the better. Increased minimum salary from 1100 to 2300 rubles has also contributed to financial inflow to the pension fund.

The first dozen of companies has practically remained unchanged in the last six months. Leader has been in the lead, as usual, — the company has been managing NPF pension reserves of Gazprom, the gas monopolist — hence stability and sustainable growth of funds in trust management (the sum exceeds 261 bln rubles by 01.07.2007). By Western standards a company with NAV equal to 10 bln dollars is considered to be quite small. But at the Russian market the sum is sufficient enough to be the Leader out of reach.

AGANA has shown the largest growth of NAV during the six months in question. The sum of assets managed by the company has increased by more than 13 times to make a real ranking breakthrough. The increase may be attributed to the establishment of a new closed mutual fund of mixed investments - Strategic assets, meant for well-off investors. “Entrance fee” to the fund is 1 bln rubles. The fund covers about 95% of the whole company business.

Speedy growth of NAV has been shown by UNIVER Management and Monomakh — 150% and 100% accordingly. Top managers of UNIVER Management may be congratulated on successful diversification of investments. Comparing with the beginning of 2007 the share of mutual funds was cut down from 99.68 to 67.84%, the share of NPF pension reserves went up from zero to 19.03%. The rest 12% were divided almost equally between reserves of insurance companies and funds of individual trust management. The new distribution tactics allowed the company to increase its NAV by 2.5 times.

Monomakh has brought its individual trust management level to an absolute minimum (by 01.01.2007 the funds in individual trust management were 47.31% of the total scope of investments, presently the figure diminished down to 0.02%). The share of mutual funds in the investment portfolio reached 98.86%, at the same time amount of assets in management increased two times (NAV of Monomakh by 01.07.2007. exceeded 6 bln rubles). The main contributor here is Zolotaya Dolina (Golden Valley) — a closed mutual fund of high risk (venture) investments (5.9 bln rubles), established in May 2007.

Thus, the spring witnessed a tendency of accumulating assets specifically by establishing closed mutual funds. The situation is clear — under the conditions of high market volatility companies feel more advantageous to get funds at their disposal for a longer period, otherwise in case of some stock market panic they may face large-scale flight of capital.

KIT Fortis Investment Management is another “growth leader”, with 70% increase of assets in management (before May 2007 the company was named KIT Finance). Significant growth of assets in management may be explained by a 2007 mid-May deal between KIT Finance investment bank and Fortis Investment - obviously accompanied by establishment of new mutual funds with big financial volumes.

A number of mutual funds and NPF portfolios grow steadily year by year. The second quarter of 2007 almost equalized the two categories, since within the last couple of years mutual funds have grown twice as fast as NPF. Active promo campaign together with increased need of the population to invest their personal money seriously contributes to growth of mutual funds and portfolios of individual trust management. The motto “To each housewife — her share” starts being implemented.