26 Jul 2006 15:51

Interfax-Center for Economic Analysis assigns three-star asset management quality rating

The Interfax-Center for Economic Analysis (Interfax-CEA), a division of Interfax International Information Group, has assigned a three-star asset management quality rating to the Capital Asset Management investment fund management company.

"This rating reflects the company‘s ability to maintain a level of effective management of mutual fund assets compliant with the average market level in the near future," Interfax-CEA chief expert Stanislav Martyushev said. The three-star rating is due to the company‘s limited ability to compete on the Russian asset management market, given the current human and financial resources available to it. In our opinion, the company should take a series of measures to check the shrinking of its share of the market of collective investment, which is a negative occurrence. Among such measures are a more intensive marketing policy to promote the assets, to form its own analytical unit and to provide a more elaborate methodological and technological footing for the investment process," Martyushev said.

The company‘s above average reliability rating is due to a transparent and stable structure of property, a stable business reputation, stable key personnel, and the absence of obligations with guaranteed yields or plans to develop new and risky business projects. This rating also indicates that the company‘s accounting is highly informative, its internal budgetary process is conservative, it has no debts and does not plan to draw external financial resources.

A weakening in market positions in 2005-06, a low diversification of the business and a relatively low profitability level had a negative impact on the rating.

The organization of its investment process was rated below average due to the fact that the investment process is insufficiently organized and technologically developed at individual stages, and that the company does not run any analytical surveys, which deprives it of a regular inflow of original investment ideas. Interfax-CEA experts also ague that the company‘s operations are characterized by a high risk of erroneous decision-making, that its team of investment experts is insufficient, while individual stages of the investment process need to be automated. Another unfavorable factor is the absence of regular access to methodological and technological decisions of major international/Russian management companies.

The company‘s high rating in risk management is based on a low level of estimated risks, due to cooperation ties with reliable banks - Vneshtorgbank and Uralsib, and the absence of over-the-counter and spot deals - and of infrastructure risks, given the company‘s cooperation with Vneshtorgbank, which acts as special depositary and special registrar of the company‘s mutual funds. Among the negative factors influencing the risk management rating are the company‘s high operational risks: a relatively high concentration of shareholders‘ resources in the funds and a high dependence of the company‘s business on one major shareholder - the National Collateral Bank. The missing element in the company risk management system is the absence of the practice to insure operational risks and professional liability.

A high rating for customer services is based on the company‘s ability to provide personalized services to its clients, including regular access to managing assets - a serious competitive advantage - a rather high level of information openness and the timely and complete publication of accounts. Insufficient marketing activity and a low effectiveness of the current infrastructure of selling shares had a negative impact on the rating.

*** Capital Asset Management company (www.casm.ru) has been operating on the Russian market since 2000 and, as of January 17, 2001, holds the Federal Financial Markets Service‘s license No. 21-000-1-00042 to conduct operations in investment fund, mutual investment fund and non-state fund management. The license was issued to the company for an unlimited period of time. The company‘s assets, as of the end of the first quarter of 2006, were comprised of the assets of mutual investment funds and amounted to 446.2 million rubles, or 0.48% of the aggregate assets of Russian open and interval mutual funds on the Russian collective investment market. The company is the manager of the Bazovy open mutual share fund, the Universalny open bond fund and the Aggressivny interval mixed investment fund.

Interfax-CEA has also assigned a three-star investment attractiveness rating to the shares in the Bazovy open investment fund under the management of Capital Asset Management.

"The investment attractiveness of the Bazovy fund‘s shares has been rated as average-market due to the fund‘s low infrastructure risks and a relatively high quality of customer services," Martyushev said. During three years - from April 2003 until April 2006 Capital Asset Management ensured highly effective management for the Bazovy assets. But the practice of investment decision-making, adopted by the company, does not guarantee equally high results in the future, including over high risks of making incorrect investment decisions, he said.

The rules of trust management of the open mutual fund Bazovy by Capital Asset Management were registered on May 23 2001 and the formation of the fund‘s assets completed on July 2 2001. The fund‘s net assets were estimated at 165.7 million rubles or 0.81% of the aggregate assets of Russian open mutual share funds This size of assets ranked the fund 20th among Russia‘s 72 open mutual share funds.

The three-star rating on the Interfax-CEA scale reflects an acceptable (average) quality level of asset management the company can provide. It also reflects an acceptable (average) level of investment attractiveness of the fund‘s shares. To differentiate company and fund ratings the Interfax-CEA scale has intermediate positions - 1.5, 2.5, 3.5 and 4.5 stars.

Please go to the http://www.amrussia.ru/ website‘s Quality Ratings for Management section, to read analytical reports on management companies and mutual investment funds.