16 июня 2016 г.

The CFA Association Russia and the Moscow Stock Exchange held the first session of their new joint course “Step-by-step Instructions for the Russian Stock Market”.

A seminar on the theme “ETFs: international practices and Russia” was held on June 16. This course consisting of five sessions, developed by experts at the stock exchange specially for the CFA Association Russia, is intended to broaden one’s knowledge of investment funds and evaluating prospects for launching one’s own investment business. The lesson was moderated by Alexei Fedorov (from the division for working with participants in the stock market at the Moscow Exchange). A presentation was given by Vladimir Kreyndel from FinEx Plus. In that company he is responsible for developing the range of products for exchange-traded funds (ETF) and portfolio decisions based on index products.

After greeting the audience, Fedorov noted how today 12 ETFs are traded in the stock exchange, and FinEx is the leader in this field. Kreyndel started off his presentation, entitled “On financial autopilot: international practices and the Russian experience”, with a provocative question: “Who allowed foreign funds on the Moscow Stock Exchange, and is this good or bad?” He talked about his own company, which offers trading of foreign shares on the Moscow Stock Exchange. In Russia, FinEx is the sole provider that has over 10 years of successful experience in the format of Global Macro strategies within hedge-fund platforms. In Kreyndel’s opinion, passive management has beat active management for many years all over the world, which is confirmed by statistics. As Fedotov explained, “We’re dealing with emotions, familiar images that lead investors to make the wrong decisions and invest, for example in Gazprom, as well as the obvious but still quite important issue of commissions: active managers try to earn as much as possible and their commissions are higher. But we’re seeing development of ETF funds, and as a result portfolio options are thinning, while index options are growing year on year. This evolution started a long time ago, but in recent years it has been developing more and more, and that can be seen on the chart.”

Exchange-traded funds are designed as mutual index funds with an unlimited circle of participants and an unlimited duration. These instruments are traded like shares and allow one to invest in ruble and foreign-currency shares. They differ from open-end funds in their simplicity, low commission, transparency, liquidity, lower depreciation (the lack of huge ruble “pillows” in classical funds), and their prospects of 7.2 percent annually or higher. Accurate tracking of international stock exchange indexes is built into these instruments by their nature. Kreyndel underscores how ETFs have proved a hit in financial markets, and in the last decade the number of funds has grown to over two thousand, while the international practice of attracting retail in medium-term investments is gaining momentum: in America it’s at 50 percent, while it Europe it is so far at 10 percent.

Demand for ETFs is growing in Russia, too, where gradually a new class of investors is arising, and with the help of ETFs, their capital will double by their retirement unlike bank deposits.

As the presenter pointed out, “Russia’s share in the global economy is only two percent, but many investors love to ‘invest in what they know’, and ETF insures them against risks of marginal decisions of diversification.” All of FinEx’s dividends are reinvested, not paid out as was done before, and this allows bypassing retail investors and new tax and legal complexities. The range of ETF funds represents the whole world and shows a yield of 4 percent on eurobonds or 3.2 on China shares up to 17.6 on gold, more than 7 percent annually on average.

When a question was asked about the reliability of ETFs, he answered that such a fund can’t go bankrupt: it is just a place where capital is stored, and it has no salaries or other payouts. Open-end funds today have been discredited, and futures certainly don’t appeal to everyone. He further noted the advantages of working online: with the help of automation, over 500 million of attracted venture capital is served and 2.2 trillion dollars is under management.

In closing, Fedotov noted that issues of commission (ours are lower than foreign ones) are the result of price wars, competition and the reliability of funds, as well as the fact that Finam, BKS and Yandex.Market are selling practically over the internet without opening accounts, and this will lead to a large-scale conservative client often entering retail and thus ETF has a big future. On this optimistic note, the first seminar in the series “Step-by-step Instructions for the Russian Stock Market” came to an end.