Western investment in Russian assets has gained heightened security


Unstable figures

Interruptions in the publication of quantitative data on the volume of investment in the Russian market through global investment funds composed of statistics, weekly disclosed by the organization EPFR Global, began in the second half of October. Traditionally their reports EPFR Global sent to the subscribers at the end of each calendar week, the information they contain for a week from Thursday of the previous week through Wednesday of the current. If the first two reporting weeks, ending in October, data for Russia revealed in normal mode, starting from the third week, they simply disappeared, despite the fact that the word Russia was mentioned in the report as a region stand out from the average weight of developing countries in terms of investor attention, said several Russian reports recipients EPFR (sent through a closed subscription).

Subsequently, approximately one and a half months, the situation with data on the investments of the global funds in the Russian market continued to be uncertain. At the end of November — beginning of December, the figures for Russia were again opened, and in the last report for the week ended 14 December, according to sources — they didn’t appear again. Previously, the uncertainty surrounding the investment of global funds in Russian assets was observed.

The words of the sources is confirmed by the absence of corresponding data in the traditional Friday news from Russian news agencies about the inflows/outflows of funds of investment funds on the Russian market in the period. Although traditionally they regularly published the figures for Russia are taken from reports from Bank analysts based on data from EPFR.

Emerging Portfolio Fund Research

EPFR — the U.S.-based organization that monitors the inflows/outflows of funds into investment funds and the distribution of these funds. The organization has been working since 1995.

EPFR tracks funds worldwide with total assets under management of $24 trillion. Its data allow us to estimate the movement of funds across regions and individual countries, including Russia.

EPFR allow you to get an idea of what types of funds investors invested money in the last week. If funds got the money, it does not mean that they place on the market. EPFR does not provide a forecast on the movement of asset prices: if last week was recorded the flow of funds, this does not mean that the market grew last week or that he will rise next week.

The sanctions question

In fact, EPFR Global, where for clarification of the situation on Wednesday evening has been requested for comment by the time of this writing, is not provided. But the vast majority of the experts surveyed, both formally and on condition of anonymity, United in the assumption that the reason lies not in the change of approach to the formation of EPFR statistics, and the reluctance of many foundations to supply EPFR information on the outflows/inflows in emerging markets, with a point to disclose quantitative information on investments in the Russian market.

EPFR, not having enough of a representative amount of data could simply cease to report the figure, which has become unreliable. “The funds are not required to provide to EPFR reporting, data are generated as a result of their survey conducted by EPFR. Completeness of responses is a matter for each specific Fund,” says one source . “Perhaps some foundations would not want to disclose information in connection with the desire to increase Russian assets and the reluctance to reveal this information”, — expressed the General opinion of the portfolio Manager UK “Kapital” Dmitry Postolenko.

In the basis of unwillingness to share funds quantitative information in Russia with a wide range of users, in the General opinion of interviewed experts, the potential risks of sanctions for failure to comply with the sanctions regime and the reluctance of foundations to attract the attention of Western regulators to their investment in the Russian market.

New urgency

Of course, the anti-Russian sanctions were imposed over a long time and has repeatedly undergone transformation. But the fact that interruptions in the publication of quantitative data on the investments of the global funds in Russian assets has begun this fall, according to market participants, may have several explanations.

“The increased inflow of investments in Russian assets, particularly debt instruments, which was observed in the autumn, could make some Western funds to be safe and close information, as sanctions has not been canceled yet,” says the analyst of “Finam” Bogdan Zvarich. According to him, investors are concerned that due to the increased investment activity regulators can begin to ask them uncomfortable questions. Zvarych did not exclude that this situation may last until the official inauguration on a post of the President of the United States Donald trump, when it becomes clear the further political course towards Russia.

According to the Bank of Russia, the entire increase in the OFZ market in January–September was driven by investment of non-residents. While the last surge of interest was observed in the fall. If in September and October the share of non-residents accounted for 20% of the outstanding OFZ, in November it rose to 38%.

For a number of funds political issue could be combined with a desire to protect the interests of customers. Some of the funds, EPFR disclose information could refuse to disclose because of the “specific operations, which could significantly distort their performance,” says chief economist “PF Capital” Evgenie Nadorshin. “For example, the placement of bonds of “Rosneft”, — he suggests. — Some of the contributors could not disclose the details of the operations in Russia because they had signed a commitment not to do in any cases. Not disclose information, they have committed themselves for the simple reason that they received the funds, which have a very definite purpose, and the right to speak about this they never received. And so no one would know that these funds got exactly what they carry out that transaction, it was not possible to indirectly monitor the movement of money, they refused to provide this information, and without them, the sample loses representativeness”.

“Rosneft” has completely placed exchange bonds for 600 billion rubles. 7 Dec.

Political question

From the point of view of market analysis, the question of the presence or absence of this information is of value to investors but is not the most fundamental. “For us it is a good indicator of business activity of foreign clients in Russia. Accordingly, if it grows, we understand that can be activated from the point of view of working with clients,” — said Vice-President of “Open Capital” Grigory Kozin.

In addition, from a macroeconomic point of view the scale of Russia’s balance of payments, the volume of these cash flows is insignificant. And yet the key aspect here is political. Investors are trying to join the political sanctions against Russia with increased economic benefits, and in this sense the situation is clear, say the experts.

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