What awaits the collective investment market in 2024

The past year was very successful for the collective investment market. All major retail mutual funds showed an increase in the value of their shares. Equity funds showed the best performance, which was due to the recovery of the Russian market and the return of many companies to paying dividends. In 2024, portfolio managers expect continued growth due to continued high dividends and redomiciliation of quasi-Russian companies. If the key rate is reduced, ruble bond funds can provide returns of 16–18%.

Post-crisis recovery

The recovery of the Russian stock market in 2023 had a favorable impact on the results of mutual fund management. According to Kommersant’s assessment, based on Investfunds data, all 122 large mutual investment funds (open-ended and exchange-traded mutual funds with a net asset value of over 500 million rubles) showed an increase in the value of their shares. A year earlier, due to market turbulence, two-thirds of funds were unprofitable. In 2023, two-thirds of retail funds ensured an increase in unit value of more than 10%; the 33 best funds saw growth of 50–100%.

The best dynamics were demonstrated by Russian stock funds. Such investments brought a return of 30–100%. This was facilitated by the active recovery of the stock market. Over the past year, the Moscow Exchange index grew by almost 44%, to 3099.11 points. This is the best annual growth for the ruble index since 2009 (also post-crisis), when it rose by more than 120%.

Investments in mutual funds of ruble bonds brought shareholders an income of 1.8–13%, money market funds provided an income of 7.3–10%. Better results were shown by currency bond funds, including substitute and yuan bonds, whose shares grew by 20–35%. This was primarily due to the growth of the dollar in Russia. At the end of 2023, the American currency rose in price by 29%, to 90.6 rubles/$. The weakening of the ruble also had a positive effect on investments in foreign stock and gold funds. Over the year, shares of such funds have risen in price by 40–50%.

Cautious Optimism

Managers are optimistic about the prospects for 2024, although they do not expect a repeat of the 2023 results for equity funds. For the current year, all respondents expect further growth of the Moscow Exchange index, but at a less significant pace than last year. Alfa Capital Management Company does not rule out an increase in the index by 25%; Pervaya Management Company expects a 30% increase in a positive scenario, of which 10% will be provided by dividend payments. “The theoretical potential for growth of the Russian stock market to fundamentally fair levels in the scenario of stable oil, a reduction in the Central Bank rate by the end of the year to 12%, the absence of geopolitical shocks is approximately 50% including dividends, but we believe that it will not be fully realized in throughout the year,” notes portfolio manager of Alfa Capital Management Company Dmitry Scriabin.

Among the factors for the growth of the stock market, its participants name not only the easing of the monetary policy of the Bank of Russia, the preservation of high oil prices and the expansion of dividend payments, but also the continued redomiciliation of Russian issuers. “Despite the risk of short-term volatility after the “move,” the re-registration process will help unlock the value of companies through a return to dividend payments, possible buyouts from non-residents, reduction of corporate risks and, of course, fundamental indicators,” notes Dmitry Scriabin.

One of the factors for the growth in the value of shares of “returning” companies may be the interest in them from institutional investors.

Anton Kravchenko, head of the shares management department of Management Company Pervaya, draws attention to the fact that now management companies cannot invest NPF funds in shares of structures registered abroad. “If they become Russian companies, the opportunity will open up for investing long-term pension money, which will lead to a revaluation of these issuers,” he notes.

Game on the bet

The most interesting for investment will be not only oil companies, but also representatives of the financial sector, information technology sector, and e-commerce. “The investment attractiveness of metallurgists is currently hampered by the lack of dividend payments,” notes Mr. Kravchenko.

Managers are optimistic about the prospects for bond funds, since if inflation declines, the Central Bank may begin to lower the key rate, which will have a positive impact on the value of shares of such funds. Considering the Bank of Russia’s forecast for an average key rate of 12.5–14.5% in 2024, a sharp reduction should not yet be expected. “The first reduction will likely occur in the second quarter, therefore, during the first quarter, keeping floaters in the investment portfolio and buying long securities with a fixed coupon will still be relevant, then the share of floaters can be gradually reduced,” notes portfolio manager of TRINFICO Management Company Yuri Grossman.

Until rates start to come down, money market funds will be a favorite among investors. Subsequently, interest will shift towards long classic bonds. Such securities will increase in price when the key rate is reduced, and ruble bond funds can bring 16–18% over the next year, says Alexey Kornev, portfolio manager at Alfa Capital Management Company. “When the key rate decreases, money market funds will lose their attractiveness relative to securities with a fixed coupon, but will still be a convenient tool for managing liquidity and the closest alternative to a deposit – a savings account,” he believes. In his opinion, such funds can provide an income of 13–15% by the end of 2024.

Vitaly Gaidaev