Collective investments and asset trust management market, 2008

The asset trust management market seems to have suffered most from the financial crisis, since management companies' success is directly proportional to the stock market achievements; amount of funds at the market is dependent on economic growth and income of the population in general. Therefore, reviewing the market in 2008 we expected to get confirmation to the pessimistic moods at the market and in mass media. But the result proved to be different. According to the key indicators, the market slowed down but did not collapse: it managed to avoid bankruptcies, mass lay-offs, total devaluation of assets or aggressive market consolidation. The possible implication is that the market may still be hit by the crisis - but, at least, it has time to get ready for the blow.

The crisis may not necessarily be catastrophic. According to Expert RA, by the end of 2008 the asset management market amounted to 1.4 trln rubles and downsized within the crisis year by 22% (from 1.8 trln rubles). The stock market collapse was followed by reduced cost of unit investment funds, but the asset management market was saved from crash by more conservative investments of pension and insurance funds and by more professional asset management of big clients in individual trust management. The market volumes may shrink even faster due to departure of temporary available state corporation funds, transfer of non-state pension funds to banking instruments and removal of funds from individual asset management to be used in more profitable currency operations.

The tail seems to wag the market. Despite pessimistic moods in the industry there were no massive lay-offs at the peak of the crisis. About 500 people were fired in the second half of 2008 - by the beginning of 2009 the industry employ averaged 3000 persons. Altogether the management companies cut their stuff by 13%, which is in line with any anti-crisis plan of action - and not remindful of attempts to survive at any price. Average lay-offs in relation to separate management companies look even better: stuff reduction among participants of our review approximated 4.5% (with median 6%). The difference between average market figures and management companies taken separately may be attributed to "tails". By "tails" we mean data on companies with big stuff and corresponding big lay-offs even in relation to the market size. As a rule, these management companies parted with employees in big departments responsible for retail development (vendors, back-office employees, market experts) and regional sale nets.

Level with the market. Management of unit investment funds last year was almost completely in line with the market index behavior. Management companies left the equity market index a bit behind, bur notably submitted to the bond market. Non-descript results signify current urgency of quality control, risk hedging and professional level of employees. For those management companies interested in future achievements the crisis provides a chance to introduce managerial adjustment and make stress-tests at the "real" market instead of mathematic models.