The return of big money: how high nets and institutions are changing the Russian stock market
- Elena Ruzleva Forbes Editorial
Copy link
Photo by Evgeniy Razumny/Vedomosti/TASS A new class of investors is being formed on the Moscow Exchange – ultra-wealthy Russians whose money, for one reason or another, was locked up in Russia. At the same time, institutional investors, who were cautious with shares after the events in Ukraine, are becoming more active on the Russian stock market. How is the picture changing on the Russian stock market and who is in charge now?
After the start of the “special operation”* in Ukraine, the Russian stock market became a market for private investors. The share of retail has noticeably increased in trading volumes for two years in a row, last year on average it was about 80%. At the same time, the Bank of Russia noted that more than 70% of assets are concentrated in brokerage accounts of qualified investors, whose share does not exceed 2%. And at the end of March Managing Director of the Moscow Exchange for interaction with issuers and authorities Elena Kuritsyna said that a new class of investors from ultra-wealthy Russians is being formed in Russia.
“It is very important to pay attention to the fact that a third class of investors appears, with whom we also need to work very carefully. Many people call them differently—some people call them “high net”, others “family office”. It is clear that these are those very rich people who have decided (willingly or unwittingly) to leave their money in Russia,” Kuritsyna said, adding that this new class of investors could become a serious support for the stock market.
Who are these people?
Telegram channel Forbes.Russia Channel about business, finance, economics and lifestyle Subscribe
Locked up, but with money
The international classification of wealth suggests that wealthy investors – high net worth – include people with a capital of $1 to $5 million, explains former senior vice president of Otkritie Bank Konstantin Tserazov. There are also very wealthy (from $5 to $30 million) and ultra-wealthy (from $30 million to $1 billion).
According to Henley & Partners, in Russia there are now 409 people with a capital of more than $100 million, 43 people are dollar billionaires. Tserazov also notes that the number of Russians with liquid assets over $1 million today is about 450,000, and Russians with assets over $30 million are about 6,300.
General Director of Ingosstrakh-Investments Management Company Roman Semenikhin believes that owners of capital of several hundred million rubles meet Kuritsyna’s definition. “Recently we have seen an influx of large private investors to the Moscow Exchange. Investors understand that investing in foreign markets or foreign real estate involves high risk, and the stock market in Russia has shown good results in terms of profitability in recent months,” he says.
“What brought them to the Russian market was the lack of opportunity to use the services of large Western financial structures and family offices, many of which, after 2022, refuse to work even with non-sanctioned clients from Russia,” says Dmitry Lesnov, head of the client service development department of Finam Financial Group. .
< span>Among wealthy Russians who have paid attention to the Russian stock market, there are probably those who have suffered from personal sanctions, says General Invest CEO Alexander Khenkin. But there are also those who simply saw prospects in the Russian stock market. Alexander Khenkin explains that there are two classes of high net worth based on sources of capital: those who formed capital abroad and have now returned it to Russia, and those who were able to form new capital from ruble excess income.
The class of private high-net investors has not yet formed, but in the current conditions it has become more noticeable, says Head of the BCS Ultima Private Banking network Grigory Sosnovsky. These people used to be able to trade on global markets without problems, but now compliance and restrictions on transferring funds abroad have led to large capital being locked inside Russia.
At the same time, rich people had a large amount of new money. “After 2022, many entrepreneurs returned to active management and making money. Many of them have frozen assets with which they received income as rentiers and are not particularly worried about financial flows. Now, due to the blockade at NSD, financial flows on foreign securities have stopped, and high-net-worth investors are actively returning to business, many of them are associated with sectors of the economy that are actively growing after 2022, for example, the defense industry or construction,” says Sosnovsky. < /span>
Material on the topic
Previously, wealthy Russians often chose cash currency to store capital, Sosnovsky says. And if in 2022 Russians stored about $100 billion in this way, now there is no rush due to capital control measures. Therefore, new money earned by high net worth goes, among other things, to the stock market. Moreover, the cost of money after the tightening of the monetary policy has increased significantly and is forcing investors to act actively, to make this money work, Sosnovsky adds.
“It appears that, as a result of sanctions, Russian retail investors and their wealthy compatriots today find themselves in roughly the same position in terms of opportunities. At the same time, the former can largely be classified as speculators, while the latter can represent long-term money, and the appearance of such players on the Russian stock market looks like a potentially very positive factor,” adds Konstantin Tserazov.
How high nets affect the market
HNWIs have been present in the market before, but their activities have been less visible in the shadow of large institutional investors. After 2022, institutions took a wait-and-see approach. Against this background, the actions of wealthy investors have become more noticeable, says Grigory Sosnovsky from BCS. “At auctions, their influence is noticeable, especially in some less liquid companies compared to giants like Sberbank or Gazprom. In blue chips, but of the second order, for example, Severstal, MMK, Magnit – sometimes very large orders appear in them, and such a “slab” certainly affects the mood in the market. And sentiment is a key factor for the market, which now belongs to a private investor,” says Sosnovsky.
These “plates” (in the language of traders), or large orders in the order book, allow speculators to “pick off” from them and serve as trading guidelines for the mass investor, says Gennady Fofanov, president of the InvoiceCafe investment platform.
At the same time, wealthy investors are less susceptible to emotional actions and decisions than mass investors, says Sergei Rogozin, head of development of investment and special products at Alfa Capital Management Company. According to him, such clients are often accompanied by professional managers who try to protect them from overly emotional purchases or sales. And besides, they do not have time to monitor market changes on an ongoing basis – this role is delegated to professionals.
“It’s hard to imagine a major investor jumping into RSC Energia shares after the dispersal of Telegram channels,” agrees Alor Broker investment strategist Pavel Verevkin.
The influence of high nets is also noticeable during initial public offerings, which intensified last year, says Roman Semenikhin from Ingosstrakh-Investments.
“But it is also worth noting that many very wealthy investors are not ready to take on increased risks and prefer more conservative instruments. They also have a calmer investment style – a better and more balanced approach when making an investment decision, approving an investment strategy and following it over the medium term,” adds Semenikhin.
Material on the topic
Return of institutions
At the same time, the class of institutional investors, forgotten in recent years, is returning to the market, that is, management companies, banks, and pension funds. While private investors switched to net sales of shares in March and became the largest sellers on the market, the largest buyers were banks, non-credit financial institutions and systemically important companies. All of them bought shares worth almost 40 billion rubles.
Veles Capital chief investment consultant Dmitry Sergeev says that they were brought to the market by the opportunity to make money on the stock market, as well as high bond rates and new Russian IPOs. Dmitry Lesnov from Finam believes that the entry of legal entities into the market is an emerging trend that may last for several years. This will lead to increased liquidity and increased attractiveness of Russian shares.
“The arrival of big money always increases liquidity in stock books and is a stabilizing factor for quotes, because they come in gradually, but in the event of a crisis they come out very quickly,” sums up Dmitry Sergeev from Veles Capital.
* According to the requirement of Roskomnadzor, when preparing materials about a special operation in eastern Ukraine, all Russian media are required to use information only from official sources of the Russian Federation. We cannot publish materials in which the ongoing operation is called an “attack,” “invasion,” or “declaration of war,” unless this is a direct quote (Article 57 of the Federal Law on the Media). In case of violation of the requirement, the media may be fined in the amount of 5 million rubles, and the publication may also be blocked.
Material on the topic < p class="a9n6c">
-
Elena Ruzleva
Forbes editorial staff
#investments #shares #Moscow Exchange #ultrahighnets #stock market Forbes newsletter The most important things about finance, investment, business and technology Subscribe Copy link Share Add to favorites Materials read by Marusya – voice assistant from VK Listen Mode for the visually impaired