Russians in 2021, according to the Moscow Exchange, have invested over 1.35 trillion rubles insecurities, and the number of investors is alr...
To avoid mistakes due to lack of experience or lack of time, many people make decisions in favor of funds - ETFs (in Russian legislation exchange-traded mutual funds) or open mutual funds. It is much simpler, and at the same time, it is at least as effective as the self-selection of securities, which is why exchange-traded funds are one of the most popular instruments both in Russia and in the world.
Russian exchange-traded mutual funds are one of the youngest financial instruments. Sber Asset Management launched the first Russian BPIF in September 2018. While this instrument has existed in the West for more than a dozen years, it is still impossible to say that exchange-traded funds have reached the ceiling in foreign markets. They keep growing. Over the past few years, there has been a boom in the launch of new funds, and now their number has exceeded one hundred. The number of BPIFs on the Moscow Exchange for 2021 increased by more than 2.5 times to 1141.
Exchange-traded mutual funds attract the attention of people with their simplicity and liquidity. You always understand how much it costs since the fund's profitability is tied to specific stock indices. Indices are formed, as a rule, by independent financial institutions, for example, stock exchanges or analytical agencies (for example, MSCI).
Initially, indices were created to make it easier for investors to track the state of the stock market or any of its segments (for example, oil or financial companies) - whether it is falling or rising. Thus, exchange-traded funds are completely transparent - any person understands how its composition is formed, and why it grows or decreases, it’s easier to say, where the market goes, the exchange-traded fund goes there.
In actively managed mutual funds, decisions are made by a team of managers, analysts, and risk managers. In this way, in exchange-traded funds, you can earn only as much as the market has grown, and the decline will be similar. In actively managed companies, there is an opportunity to "overtake" the market, that is, to earn more, but this depends on the qualifications of the manager.
It should be noted that exchange-traded funds try to correspond as closely as possible to the index that they repeat (or else they say “which the fund follows”). However, it is impossible to ensure 100% compliance at any given time, unfortunately. Every fund has a so-called "following error". This is the percentage by which the fund deviates from the tracked index. The smaller the following error, the more qualitatively the fund is managed, so you need to pay attention to this when choosing a fund.
The main advantage of BPIF is low commission costs and high liquidity, that is, the ability to buy and sell on the stock exchange online. For example, you can also pay off open mutual funds at any time, but the funds will be transferred to you only the next day or even after 2-3 days, depending on the management company. As for commissions, in bond funds in Sber Asset Management (the situation is similar among large management companies), the commission is on average 1.5-2%, in equity funds - 3-3.5%.
In exchange-traded funds, the commission is on average 0.8-1%. It is often written on the Internet that commissions are still too high in Russian exchange-traded funds, because, for example, in Western markets, commissions are 0.1%, and there are even funds where there are no commissions. Indeed, American funds, that follow US indices are very low or have no fees at all.
However, if we take foreign funds focused on the Russian market, then the amount of commissions is quite comparable to Russian funds. For example, in the largest foreign fund VanEck Russia Vectors, the commission is 0.61%.
Also, in many countries, the legislation allows local management companies to use securities from the fund for their own purposes, for example, to lend to other investors with these securities, so they earn on the fund and may not charge a commission.
In Russia, there is no such possibility yet. 61%. Also, in many countries, the legislation allows local management companies to use securities from the fund for their own purposes, for example, to lend to other investors with these securities, so they earn on the fund and may not charge a commission. In Russia, there is no such possibility yet. 61%.
Also, in many countries, the legislation allows local management companies to use securities from the fund for their own purposes, for example, to lend to other investors with these securities, so they earn on the fund and may not charge a commission. In Russia, there is no such possibility yet.
How To Choose A Fund?
The most difficult and necessary for an investor when choosing a BPIF, like any other financial instrument, is to determine the value of the acceptable risk level for himself and his savings. Since August of this year, the Moscow Exchange introduced the labeling of complex financial instruments.
It is designed to help brokers and banks reduce the number of times private investors buy products they don't understand the risks. However, the most effective way is to invest in tools with built-in risk profiling. So, at the beginning of the summer of 2021, the first exchange smart funds in Russia were launched on the Moscow Exchange.
Smart funds are the same exchange-traded funds (ETFs), only repeating the structure of special smart indexes. These are hybrid indexes that consist of several indexes at once. For example, You have decided to purchase several exchange-traded funds from Russian American stocks, as well as Russian corporate bonds.
For 30% of your investments, you bought shares of an exchange-traded mutual fund for the Moscow Exchange Index, for 30% - for a BPIF for the S&P500 American Stocks Index, and for 40% - for a BPIF for the Moscow Exchange Corporate Bond Index. You had to buy everything separately. Then, every 3-4 months, sell those that have grown and buy in addition to those that have fallen in order to return your portfolio to its original state. A hybrid index already includes all three indices in this ratio, so you can buy one fund, which will have, as it were, several BPIFs at once.
At the same time, a smart fund is not a fund within a fund, but a set of securities, i.e. not a fund in which there are several more funds, and only securities in them. Respectively, all rebalancings in the fund are carried out according to a special algorithm without the intervention of the investor himself. In addition, when you distributed your funds in this way, you believed that such an allocation would make the portfolio moderate in terms of return and risk.
Can the majority of investors independently determine their risk profile and, moreover, collect another investment portfolio for each risk profile. Smart funds are ready-made investment portfolios as if they had purchased several exchange-traded funds or several tens or even hundreds of securities. They are formed in accordance with five main risk profiles.
Thus, now the investor does not even need to collect a portfolio of funds. that such a distribution would make the portfolio moderate in terms of return and risk. Can the majority of investors independently determine their risk profile and, moreover, collect another investment portfolio for each risk profile. Smart funds are ready-made investment portfolios as if they had purchased several exchange-traded funds or several tens or even hundreds of securities.
They are formed in accordance with five main risk profiles. Thus, now the investor does not even need to collect a portfolio of funds. that such a distribution would make the portfolio moderate in terms of return and risk. Can the majority of investors independently determine their risk profile and, moreover, collect another investment portfolio for each risk profile.
Smart funds are ready-made investment portfolios as if they had purchased several exchange-traded funds or several tens or even hundreds of securities. They are formed in accordance with five main risk profiles. Thus, now the investor does not even need to collect a portfolio of funds. as if you had purchased several exchange-traded funds or several tens or even hundreds of securities.
They are formed in accordance with five main risk profiles. Thus, now the investor does not even need to collect a portfolio of funds. as if you had purchased several exchange-traded funds or several tens or even hundreds of securities. They are formed in accordance with five main risk profiles. Thus, now the investor does not even need to collect a portfolio of funds.
The fund's portfolios are composed according to the principle of optimal expected return, securities are diversified by industry, and their rebalancing takes place quarterly.
Speaking of the exchange-traded funds market in general, it is worth saying that it is at its initial stage of development and can demonstrate multiple growths in the coming years simply by turning existing assets in brokerage accounts from individual securities into funds. So we see huge potential for exchange-traded funds in the Russian market. This segment of the market will grow at a faster pace and in our opinion, doubling the market every year in the next 3-5 years is quite possible.
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