Comparative analysis of the Russian and Ukrainian Open-end diversified mutual funds markets (2006)

A mutual fund is a form of collective investment3489, Ukraine 12,26
that pools money from many investors andThe growth dynamics of NAV in comparison with
invests their money in stocks, bonds, short-term2005 (%): Russian Federation 95,97%, Ukraine
money market instruments or other securities.121,07%
Being open-ended means that, at the end ofAnnual return: Russian Federation 28,4%, Ukraine
every day, the fund issues new investments27-29%
certificates to investors and buys backFrom the comparative analysis we can see that
investment certificates from investors wishing tothe Ukrainian market of OEDMFs is less developed
leave the fund.in spite of the fact that the annual return of the
The first mutual funds were established in Ukraineboth markets are almost equal.
in 1994. When the law of Ukraine “On MutualThe main reasons for this situation are:
Funds (Share and Corporate Investment1. The lack of information about the OEDMFs’
Funds)” was passed in 2001, the mutual fundsactivities and absence of widespread
appeared in their classic form.advertisement in mass media;
Today the Ukrainian practice of investment by2. The Distrust of the population to the mutual
the population in OEDMFs (open-end diversifiedfunds;
mutual funds) is not so widely spread as in3. An undeveloped distributor’s network of
Russian Federation, but the huge potentialthe investment certificates;
advantages for the investors predetermine the4. A low number of investors.
interest in this sphere of investments.Most Ukrainian investors only pay attention to the
The aim of this article is to compare the Russian“annual return” index, not correlating the
and Ukrainian open-end diversified mutual fundsprofitability of the portfolio with the investments
markets, the research problems of OEDMFs; torisks (uncertainty).
analyze their future prospects.The main issue of the OEDMFs activities on the
The activity of open-end diversified mutual fundsUkrainian market is the absence of information
supposes the issue of the investment certificatesabout such coefficients as: alpha, beta, correlation
with the ransom right. They are the mostcoefficient, Sharp’s coefficient, Treynor’s
attractive for the persons, who do not like tocoefficient. The foresaid coefficients are universal
take risks, because diversification of thetools for the evaluation of successful portfolio
fund’s investments significantly reduces risksmanagement and for the comparison of mutual
compared to the risks of investing in a singlefunds. The coefficients help investors to receive
security by spreading investments across manymore complete information about the
markets, economic sectors and companies.effectiveness of portfolio’s management.
2006 was a successful year both for RussiansThe results of the OEDMFs activities in 2006 by
and Ukrainians investors. Russian and Ukrainiansquantitative criterion provide evidence for the high
OEDMFs showed returns higher than the inflationopportunities for further quick development of
rate and the number of the investors on boththis market segment in the Russian Federation
markets increased.and the slow development in Ukraine.
At the close of 2006 (31.12.2006) there were 10In order to raise the activities of the Ukrainian
open-end diversified mutual funds on the Ukrainianpopulation it is necessary to provide effective
market compared with 296 on the Russian one.mass media work.
The dynamics of the funds (%): RussianComparative analysis of the Russian and Ukrainian
Federation +45,81%, Ukraine +150%open-end diversified mutual funds markets
The percent of the market segment (from theindicates that the Ukrainian market needs the
whole amount of the funds, %): Russiandevelopment of its distribution network and the
Federation 48,20%, Ukraine 2,05%.provision of clear marketing to the population
Net asset value (mln. USD): Russian Federationabout the mutual funds activities and opportunities.