Mutual funds in March 2023

The beginning of spring pleased private investors in the collective investment market. The best dynamics was demonstrated by funds focused on precious metals, whose shares added in price both due to the growth of the dollar price of the metal and the weakening of the ruble. Other FX funds also benefited. A good profit was provided to investors by Russian equity funds. The outsiders turned out to be ruble bond funds, but they also brought a positive result, albeit not a big one.

Gold gains weight

In terms of mutual fund management results, the first spring month turned out to be more successful than the last winter month. According to Investfunds, in March, only three out of 182 large retail funds (open-ended and exchange-traded mutual funds with assets over 500 million rubles) lost their share value.

At the same time, almost half of the funds provided income above 5%, while the top 20 increased the value of a share by more than 10%. Results a month earlier were much weaker: only ten mutual funds ensured an increase in the value of a share above 5%.

The best results in the first month of spring were shown by funds focused on investments in gold assets (both in physical metal and in gold ETFs and shares of gold mining companies).

According to Investfunds, shares of such funds have grown in price by 10-14%. In March, the price of gold at the auctions of the Moscow Exchange exceeded 5 thousand rubles per year, having updated the maximum since April 21, 2022. At the end of the month, the price fixed slightly below the round mark, but almost 13% higher than the values ​​of the end of February. This was facilitated by the increase in the dollar price of the precious metal on the world market by 7.7%, to $1968 per troy ounce, as well as the growth of the dollar on the Moscow Exchange by 3.5%, to the level of 77.60 rubles/$.

Underrated hi-tech

For the third month in a row, funds focused on high-tech remain among the growth leaders. According to Investfunds, the value of shares in such mutual funds increased by 6-11%. This happened against the backdrop of the rise of this sector in the US market. Last month, the NASDAQ Composite index rose by 6.7%, while shares of companies such as Alphabet, Apple, which are present in some portfolios of Russian mutual funds, rose by 12-15%.

“The main reasons for the growth of IT companies were the market’s expectations that the US monetary policy tightening cycle would soon end, which, coupled with their strong oversold, made them the most attractive for investors in the first quarter,” notes Sofia Kirsanova, portfolio manager at Pervaya Management Company.

Good profits were brought to shareholders by Russian equity funds, whose shares added 4.0-10.5% in price.

At the same time, the growth leaders among ruble-denominated funds were funds focused on companies in the oil and gas industry and the electric power industry. In March, the Moscow Exchange index rose by 8.8%, exceeding the mark of 2450 points.

This rise, according to TRINFICO portfolio manager Yuri Grossman, was largely due to decisions on the payment dividends such large issuers as Sberbank, Inter RAO, PhosAgro, NOVATEK (a number of which exceeded analysts’ expectations), as well as the visit of CPC Chairman Xi Jinping to Moscow, where important agreements were reached on cooperation between Russia and China.

Foreign Exchange Backed Bonds

The currency revaluation also had a positive impact on bond funds, whose assets are eurobonds, which also replace yuan bonds. Shares of such funds increased by up to 5%.

At the same time, ruble-denominated government bond funds for the most part provided a symbolic income – less than 1%.

Shares of second and third tier corporate bond funds added about 2%.

According to Yury Grossman, OFZ quotes almost did not change in March due to the decision of the Bank of Russia to keep the key rate, while the spreads between the yields of Russian second- and third-tier bonds and the yields of government bonds noticeably narrowed in March against the backdrop of a general positive.

“Unlike OFZs, the prices of more volatile and less liquid securities are significantly affected not only by fundamental but also by psychological factors. It seems that investors have found this month to be more calm than the previous 12, and as a result, they have become bolder in buying riskier assets,” he notes.

The positive remains

Managers do not rule out further growth of the Russian stock market, and therefore expect continued demand for mutual funds. This will be facilitated by an influx of liquidity in the form of dividends, some of which will be reinvested back into shares.

The segment of funds with replacement bonds and yuan bonds also looks interesting due to its currency component.

“Under the conditions of various types of blocking and sanctions, these instruments are among the few that offer insurance in case the ruble weakens,” says Igor Kozak, Managing Director for Investments at TKB Investment Partners.

In addition to the protective component, these papers are interesting from the point of view of the risk / return ratio. For example, substitutes papers of Gazprom are traded with a yield of 7-8% per annum in dollars and euros. Through active management, the results of investments can be significantly higher.

“If you use the moments of entry into securities correctly, you can earn on additional price revaluation. As a rule, the prices of replacement bonds decrease for some time after the issuer implements the Eurobond replacement procedure, but subsequently recover to normal levels,” notes Igor Kozak.

Gold can still act as protection against the weakening of the ruble. “A decrease in the dollar index, including due to the refusal or reduction in the volume of settlements in this currency by a number of countries, the crisis in the banking system of developed countries will support the quotes of the precious metal. At the same time, the demand for this asset from the world’s central banks will remain high,” notes Igor Kozak.

Vitaly Gaidaev