“The company is expanding its product range to offer clients a wider choice of conservative strategies, as we see a growing demand for such instruments during periods of high uncertainty in the stock market. Clients can also use the opportunity to switch temporarily, free of charge, to this fund to wait until a market downturn is over. Based on the investment objectives of the fund, we decided to set the management fee at a minimum level,” commented Alexander Pugach, CEO of UralSib Asset Management.

The investment strategy of the UralSib Money Market Fund aims at a short-term investment horizon - from three to six months. The Fund portfolio will comprise the most liquid Russian government, municipal and high-grade corporate bonds, as well as deposits with the most reliable Russian banks and derivatives. “The Fund portfolio will be rebalanced depending on the market expectations to ensure the optimal return-to-liquidity ratio. Bank deposits will vary from 25% to 50% of the Fund NAV in a normal situation,” specified Alexey Korolenko, the Fund Portfolio Manager.

“During periods of increased volatility this investment strategy becomes an efficient balancing tool that adds stability to an investor’s portfolio overall. Short-term deposits sustain stable interest rates, while efficient stock picking increases expected return,” added Oleg Galkin, CIO of UralSib Asset Management.

The minimum investment amount in the Fund is 10,000 rubles (about $330). The management fee is 0.5% per annum. The initial formation of the Fund will commence on March 23, 2012 and be completed upon reaching an NAV amount of 11 million rubles.

The value of investment units may increase or decrease. Past performance is not a guarantee of future returns. The state does not guarantee unit investment fund returns. Prior to purchasing fund units, it is important to study carefully the Rules (prospectus) of the respective unit investment fund. There are up-front fees charged for the purchase of fund units and redemption fees charged for the redemption of fund units. Fees reduce fund returns.

UralSib Management Company CJSC (UralSIb Asset Management); unit investment funds, investment funds, and non-state pension funds management license #21-000-1-00037 issued by FFMS of Russia on July 14, 2000.

Open-end unit investment fund UralSib Money Market Fund rules registration number 2314 with FFMS of Russia as of February 21, 2012.

Orders for purchase, conversion, and redemption of fund units can be submitted to UralSib Management Company CJSC and/or the agent (agents) in accordance with the Rules of respective unit investment fund. For additional information on the terms and conditions of fund operations or any other documents required by the Russian legislation, please call +7 495 705 9058, 8 800 200 9058. You may also visit the company’s office at 52, Building. 5, Kosmodamianskaya Embankment, Moscow, 115054, or our website at www.am.uralsib.ru.

Alexander Pugach, CEO of UralSib Asset Management, reveals what are the main factors likely to impact the Russian fund industry over the next few years.

Top Russian CEO says doubt affecting fund industry's growth

One of Russia's leading fund managers Alexander Pugach, CEO of UralSib Asset Management, reveals what are the main factors likely to impact the Russian fund industry over the next few years.

In this exclusive Citywire interview at his offices in Moscow, he outlines his vision of the future, discussing how asset managers will need to adapt their business models to be confident of growth in the next few years and who will be the winners and the losers.

Following the Russian asset management sector's near collapse after the 2008 crisis, with the Moscow stock market suffering a severe drop and many Russian investors withdrawing their cash from asset managers, Pugach reveals whether he expects to see more such systemic crises and what is the best way to tackle them.

Established in 1996 UralSib Asset Management is one the largest and oldest asset management firms in Russia and manages assets of over 59,000 private and institutional investors.

What are the most important factors influencing the asset management industry in Russia over the next few years?

The Russian fund industry is highly dependent on stock market sentiment. People don’t invest in uncertainty periods. The development of the industry requires long-term confidence in the market and its stable growth. This was the reason for the considerable inflows in Russian mutual funds in 2005-2007. The demand for mutual funds will recover following stock market stabilization.

Long-term factors for the industry's growth include improving financial literacy and building a long-term investing culture with the public. It is a serious issue that the Russian middle class doesn’t appreciate the importance of saving and investing. The ratio of domestic investments to Russia’s GDP is about 2%, which is far lower than in most emerging economies.

The government can help the formation of a long-term domestic investor class by introducing tax incentives, be it with investment in mutual funds, pension funds, or just equities.

Another issue is pension reform. A greater focus on the development of the individual pension savings component (the third pillar) would help to motivate our citizens to start forming their own pension accounts well before approaching retirement. These steps would also improve market stability.

In the short term, the major factor is the development of banking distribution network. We expect increased interest from banks in diversifying businesses towards commission products that will enable them to have stable non-interest income.

What opportunities and challenges will this create?

In my opinion, product development is one of the major challenges for the industry. If we look at Russian mutual funds, we’ll see that equities account for about 75% of NAV. Meanwhile, investor surveys demonstrate a tendency to invest in conservative instruments.

Therefore, the industry as a whole should place more emphasis on creating conservative, highly liquid strategies, as well as absolute-return products.

Diversification of distribution channels is another important task. The Russian asset management industry is moving towards the international business model, with asset managers in charge of products and performance, and banks in charge of sales and client communication. We are currently talking to a number of large national and regional banks as potential distributors of our funds.

How will asset managers need to adapt their business models to be confident of growth in the next few years? And who will be the winners and the losers?

Competition will definitely tighten. Sberbank’s entrance into the asset management industry actually makes us optimistic. They will be able to dedicate considerable resources to improving financial literacy in Russia and bring new classes of retail investors to our market. There is no doubt that the industry will benefit from a widening investor base and new inflows.

Tighter local competition, though, along with the ETF industry's growth, will put serious pressure on asset managers’ fees and thus accelerate the market consolidation process. The scale of business will become a crucial factor for business survival.

The winners will no doubt be those companies that will succeed to build efficient relationships with distributors to acquire new clients and excellent client service to retain them.

In product terms, what is the likely evolution in the offer of asset management products?

Today, top retail players in Russia offer from 15 to 25 mutual funds, mostly ‘plain vanilla’ and single-sector, among which three to five are core products.

Most often, these are equity, bond and balanced funds. The growth of the mass investor class, thanks to Sberbank’s efforts, will definitely increase retail NAV concentration in ‘plain vanilla’ strategies.

The product proposition, however, will continue to evolve towards commodities, international products, and alternative strategies. The high-net-worth segment will show more interest in products with predictable returns.

In the institutional segment, we’ll see rapid asset growth due to the developing pension reform and the accelerating transfer of pension savings (third pillar funds) from Vnesheconombank, the state asset manager, to non-state pension funds and private asset managers.

We believe there will be higher demand for principal-protected and absolute-return products. We also expect a call for higher sophistication, better tailored solutions, and improved cost efficiency.

How many more systemic crises do you expect over the next decade? And how do you prepare to tackle them?

I am sure there will be systemic crises. Two major things help a company to survive these crises.

First of all, it is business diversification, both in terms of client groups, asset classes, and cash flows, that makes any business resilient in market turmoil. UralSib is a universal asset manager, actively working with all major segments - retail, high-net-worth, and institutional.

Our asset structure helps us to achieve the right balance between business stability and sustainable revenues. This model proved successful during the recent crisis.

The other factor is transparency. It is crucial that clients completely understand our investment decisions and support them, which ensures ‘no surprises.’ If you are a transparent partner, clients stay with you despite any market downturns. We believe this helped us to retain all of our key clients during 2008-2009.

First Vice-President FC URALSIB Alexander Dementiev with Japanese colleagues

On November 10, 2011 Uralsib Asset Management held a seminar in Tokyo called “Investments in the New Russia”. This was the first event of this kind held abroad for the firm. Representatives of over 40 Japanese asset management companies and distributors took part (including the large Japanese asset managers Daiwa, Nomura, Kokusai and others). Leading representatives of the press also reported on this event.

Alexander Dementeiv, First Vice-President of UralSib Financial Corporation and Alexander Pugach, CEO of UralSib Asset Management, greeted the guests. The Head of Investment Research at UralSib, Alexander Golovtsov, reviewed the macro situation in Russian economy. UMJ Russia Fund Managing Partner Yusuke Otsubo shared his views on doing business in Russia. Then Michael Vasileff, Head of International Sales at UralSib Asset Management, spoke about the investment environment and attractive opportunities in the market. Finally, Nikolay Vukolov, Senior Vice President at UralSib, provided a brief overview of the company and its investment capabilities.

Japanese investors first became interested in developing markets in 2007. To date they have made investments in Brazil, China and India funds. The amount of such investments in China is currently $USD 8 bln., in India $7 bln., and Brazil $6 bln..  However, so far Russia has only received $500 mln. in investment and only 6 Japanese asset management companies out of 55 have a Russian Equity Fund. According to Mr. Pugach, joint management of such funds has considerable potential.  An example of such partnership is the RSMC Fund (Russian Small and Mid Cap Fund) of Pictet Bank in Switzerland which is managed by UralSib Asset Management Company.

The seminar emphasized that there are interesting investment opportunities in Russia apart from the traditional oil, gas, and energy “blue chips”. As the Olympic Games and World Cup Football Championship will be held in Russia in the coming years, the country is planning huge investments into infrastructure. The companies of the second and third tier capitalization on the Russian stock market are going to take part in this process, so  their businesses are expected to develop rapidly. These companies’ shares are an underappreciated  opportunity to take part in Russia’s fast growing market.

During the trip to Japan the team also met several of the largest Japanese asset managers. Included in this schedule was a meeting with Mr. Takahiro Mitanni, the President of GPIF (State Pension Fund of Japan) – the largest institutional investor in the world with $1.3 trl. under management. The fund has started to actively invest in developing markets  and UralSib hopes to attract some of that money to Russia.

Seminar Participants

CEO UralSib Asset Management Alexander Pugach

The National Rating Agency (NRA) of Russia assigned the highest reliability rating to UralSib Asset Management Company (Moscow) at the AAA level.

Historically the group of UralSib Asset Management companies includes three companies: (1) UralSib Asset Management, (2) UralSib Capital Management, and (3) UralSib Real Estate. In 2011 the NRA performed an evaluation of two companies of the group – UralSib Asset Management and UralSib Real Estate. (The evaluation of UralSib Capital Management was not carried out.) The group is a part of the Financial Corporation (FC) URALSIB that includes a banking business, leasing, factoring and insurance companies. The major asset of FC URALSIB is URALSIB BANK. The majority shareholder of FC URALSIB is the president, Mr. Nikolay Tsvetkov.

UralSib Asset Management is one of the oldest and largest asset management companies in Russia. The company is one of the leading managers of retail investment funds managing 8 open and 2 interval funds with 17,6 bln. RUR in assets. This includes the UralSib First Fund which had assets of more than 9bln. RUR as of 01.07.2011. At the beginning of 2011 three interval funds were reorganized into open funds. The retail mutual funds under UralSIb Asset Management are sold via a wide network of branches and subsidiaries of URALSIB BANK. In May of 2011 UralSib signed an agency sales agreement with Citibank in Russia.

UralSib Asset Management also manages the equity funds, reserves and accumulations of Russian pension funds, pension accumulations of individuals (based on an agreement with Russian Pension Fund), the assets of the Ministry of Defense in Russia based on the program “military mortgages”, and the reserves of insurance companies. The activity and income of the company is well diversified among the sectors and has been steadily increasing. In 2011 the company signed agreements on trust management of pension accumulations of “UGMK-Perspective” Pension Fund and the compensational fund NP CRFIN.

In 2009-2010 the company began to quickly develop funds for qualified investors, including for distressed assets. Currently the assets of 5 closed end funds under UralSib management make up more than one forth of the firm’s client base. According to the consolidated statement of URALSIB BANK, in practice, assets of the closed end mutual funds under management of the group belong to and are controlled by FC URALSIB departments.

Institutional Investor, an authoritative international magazine, has conducted its first ranking of Russia's Top Money Managers: The Russia 20.
UralSib Asset Management entered TOP3 by assets under management.

Notes: All assets are as of June 30, 2011 converted from rubles using the exchange on that date. Portfolio total may not equal assets under management because of currency conversion and rounding.
1.         Firm was formerly KIT Fortis Investments
2.         Total includes assets under management of Bank of Moscow Asset Management Co.

Source: http://www.institutionalinvestor.com/Research/3405/Russias-Top-20-Money-Managers.html

ZAO Citibank To Distribute UralSib Asset Management’s Mutual Funds

Starting 30 May 2011, ZAO Citibank’s clients will be able to make investments
in mutual funds UralSib Asset Management.

MOSCOW 30 May 2011  - UralSib Asset Management and ZAO Citibank have announced today the signing of a new agency agreement. Within its framework, Russian clients of ZAO Citibank will be able to invest their assets into mutual funds of UralSib Asset Management.

Sergey Korotkov, Russia Retail Banking Business Head, says: “Citibank is always prudent when choosing its investment partners, focusing on firms with a solid track record, experience, and a strong and stable management team. UralSib Asset Management is the oldest participant of the asset management market in Russia. Through this partnership, we continue to extend the range of investment solutions that we offer to our clients.”

Alexander Pugach, General Director of UralSib Asset Management, says: “Our agreement with Citibank, one of the global banking leaders, will enable us to offer Russian clients of the Citibank world class investment products. These are first successful steps in our joint project. I hope this partnership will be fruitful and mutually beneficial.”

UralSib Asset Management offers Citibank clients four open mutual investment funds: “URALSIB FUND First”, “URALSIB FUND Professional”, “URALSIB FUND Metals of Russia”, and “URALSIB FUND Oil & Gas”.

Mutual funds of UralSib Asset Management will be available for Citibank clients in all branches of the bank in 8 Russian cities: Moscow, St. Petersburg, Volgograd, Yekaterinburg, Nizhny Novgorod, Rostov-on-Don, Samara and Ufa.

UralSib announces that the Rules of its open and interval funds have changed. These changes now broaden the opportunities for investments into the funds:

• Property rights from futures and  options agreements were added to investment projects ;
• UralSib Management is allowed to make repurchase agreements;
• The open funds under UralSib Asset Management are included in the list of funds that can be changed to interval type funds.

Alexander Golovtsov, Head of Investment Research at UralSib Asset Management ,says: “In the scope of Russian law broadening of the tools using options and futures helps to protect clients from considerable losses in case of a worsening the state of the market. Thus we can change the correlation between expected income of mutual funds and investment risk”.

The 15th year of Collective Investments and 10th year of the  National Managers League (NML) establishment was celebrated on April 19, 2011.
15 years is a long period of time and an important phase in the historical development of the sector. Representatives of different institutions that together form the collective investment industry in Russia gathered together to celebrate the occasion. The official part of the festivity was dedicated to awarding the outstanding market members that influenced its development and made considerable progress.
UralSib Management is the prize winner of the nomination for “Mutual Funds Management”.
Prize winners traditionally receive a certificate and small statue of the Roman legionaire.
Oleg Galkin – Chief Investment Officer accepted the prize from the hands of Dmitry Alexandrov, the President of the NML.  “It is a very significant nomination for our company. This prize shows the quality rating of our fund management for ten years. Of course receiving this prize is not a reason for “resting on our laurels” but is an acknowledgement and brand reinforcement for UralSib Asset Management. It is very important first of all for our existing and potential clients”.

The annual conference on The Future of Trust Management in Russia, organized by the rating agency Expert RA, took place on April, 5, 2011. During the conference the solemn ceremony of awarding the winners took place. The URALSIB group of Companies became the prize-winner of two awards:
- “The first-rate Open Mutual Fund”, and
- “For the the leading position in the Collective Investment Funds Market”
Alexander Pugach, Chief Executive Officer, commented “Today the asset management market size is a bit more than 4% of GDP (gross domestic product). If we deduct captive assets this means – less than 2%. The growth in the market will take place. Through the normal market growth interest rates for deposits will become less and less competitive in comparison to mutual funds and their collective investments’ profitability. The main thing that can change is the volume – it can grow in 10 years up to ten times. The quality of clients’ service should improve rapidly – the service rate, convenience, the amount of available information, and product adaptation to client’s individual needs”.

URALSIB led the TOP-20 in Commersant Rating according to the 2010 return.
Commersant summed up the efforts of management companies in 2010.
The indicator of effectiveness is represented by the collective investment (the main managers’ activity) return.
The effectiveness of companies with return more than 50bln.RUR (50 companies) was taken into consideration.
The data was taken form accounting reports placed on the companies’ web-sites.
The total return for collective investments for the last year increased by 17, 3% and became more than 10, 3 bln. RUR.
Even so URALSIB leads the rating with the return of more than 1bln. RUR (see the table below).