The Central Bank softens the criteria for the participation of pension funds in IPOs

The Bank of Russia proposes to expand the opportunities for non-state pension funds to participate in initial public offerings of shares. It is planned to allow funds to participate in smaller placements, as well as to allow them to purchase larger blocks of shares. Non-state pension funds and their management companies do not exclude participation in future placements, however, their approach to such risky securities remains quite conservative.

According to the draft instructions of the Bank of Russia regarding the investment of pension savings posted on Tuesday, March 5, pension funds will be able to buy shares at the IPO if the amount of the placement is at least 3 billion rubles. Currently, participation is limited to placements of at least RUB 50 billion. In addition, NPFs will be able to purchase up to 10% of the placement volume (currently up to 5%).

Since the end of 2022, 12 IPOs have taken place, but the total volume of placements amounted to just over RUB 52 billion. At the same time, five placements did not reach the proposed lower limit of 3 billion rubles. In general, participation in such placements is important for diversifying NPF portfolios. At the same time, issuers will be assessed based on many factors – growth prospects for the sector and the company itself, the presence of a dividend policy, transparency, etc. SberNPF noted that, taking into account the fairly large portfolio of shares in pension assets (at the beginning of 2024 – 12.1% pension savings) “the fund’s overall appetite for additional risk is limited.” But, as the fund explained, “new placements will participate in the process of selecting investments to form a portfolio of shares.” In addition, as the general director of TKB Investment Partners Dmitry Timofeev points out, management companies working with non-state pension funds are faced with the task of beating the “pension indices” of the Moscow Exchange. Therefore, the emergence of “non-index” shares, which have a growth potential higher than the shares included in these indices, “will attract the interest of institutional managers to IPOs in the interests of NPF PN,” he points out.

Until now, only banks and mutual fund management companies have participated in initial placements among institutional investors. As NAUFOR President Alexey Timofeev notes, “the participation of institutional investors in IPOs is extremely important both for issuers and for retail investors participating in the placement – institutional investors are able to better evaluate the issuer, influence its corporate governance, and stabilize the market for its shares.”

At the same time, it cannot be said that issuers are experiencing an acute shortage of demand. As a rule, oversubscription is several times higher than the supply, and in some cases (Astra Group, Diasoft, in the amount of 3.5–4 billion rubles) – tens of times. And not just from retail investors. For example, institutional investors were actively interested in shares of software companies (Astra Group, Diasoft) or Sovcombank (see, in particular, “Kommersant” dated December 15, 2023).

Non-state pension funds pursue the goal of ensuring break-even on pension savings at the horizon of the year, and the share of shares in their portfolios rarely exceeds 5–7%. Also, according to Ivan Nechaev, director of the investment department of NPF Future, the securities of issuers conducting IPOs are “more risky, since there is no public history for them.”

The limiting factors for the participation of non-state pension funds in such placements will remain the small capitalization of companies going for IPO and small volumes of placements, experts note. According to Dmitry Timofeev, for non-state pension funds the formation of “microscopic positions within investment portfolios may not be economically feasible.” In addition, the vast majority of small capitalization companies may not comply with the “investment policies of non-state pension funds and the strategies implemented by the managers of these portfolios,” including due to high risks.

Vitaly Gaidaev, Polina Trifonova