Vladimir Potapov

The CEO of VTB Capital Investments talks to Burhan Khadbai about the macroeconomic landscape, the rise of retail investing in Russia and the asset manager’s ambitions to get involved in the growing cryptocurrency market.

The rise of retail investing during the Covid-19 pandemic has given a boost to Russia’s asset management industry, changing the dynamic of the retail banking landscape in the country. There is also an increasing focus among Russian investors on environmental, social and governance (ESG) factors, as well as cryptocurrency. Meanwhile, on a macro level, fast-rising interest rates are causing money managers to adapt their strategy, with fixed income becoming a more attractive asset class. The Banker spoke to Vladimir Potapov, CEO of VTB Capital Investment Management, Russia’s largest asset manager, about these themes.

Q: Central bank interest rates are rising quickly around the world in response to soaring inflation. How are you adapting your strategy around this?

A: Rates are already pretty high at 8.5% and they will go higher. Situations like this create opportunities: in the first four months of the pandemic from March 2020, we had the biggest ever inflows — people rushed to buy.

Fixed income has become much more interesting. A few years ago, 80–85% of a typical portfolio in Russia was made up of fixed income before the diversification into equities. But equities still represent less than 50%, with an average portfolio in Russia made up of 40% equities and 60% fixed income.

Markets will need to rethink the high valuations in response to rising rates. The inflation cycle is not over, so I’m a bit cautious on growth stocks because valuations are so high. There are interesting opportunities in value stocks. We like emerging market stocks, some emerging market fixed income opportunities and commodities.

Q: How would you describe the retail investment landscape in Russia?

A: Retail investments have been accelerating throughout the pandemic. What we are seeing is that more and more individuals are using investments as part of their savings strategy. The retail element of our business is getting bigger. Our turnover last year was mainly attributed to the growth of retail investors, with about 60% of our revenue coming from retail. In total, we manage around Rbs4.3tn ($54.4bn) assets and about 55% is from retail investors.

The development of our apps was a big factor behind the growth of our retail investments — they make it transparent, cheap and easy to invest. You can open a new account in three minutes and you don’t need to have an account with VTB. We are working on launching the same app in Frankfurt for our German clients.

People are looking for returns with a very low entry point. A couple of years ago, retail savings in investment funds in Russia were less than 12%, but now it’s up to 20%. But that is still lower than what you see in the US or other conservative countries, so there’s still some way to go.

Q: What are your thoughts on ESG? 

A: This is a big theme and there is a lot going on in this space. We’re moving from capitalism into post-capitalism and an inclusive economy. People are starting to think not just about the returns of their investments, but what impact they have. There is a lot of demand for ESG products. We were the first asset manager in Russia to launch ESG funds and last year we signed up to the Principles for Responsible Investment standards.

We have to start asking questions. It’s a step-by-step approach. Of the funds we manage, only 1% of our assets are ESG-related — which is fairly low, but around 30% of our clients follow ESG ratings.

Q: Will you get involved in cryptocurrencies?

A: Russia has a law that makes trading digital financial assets possible only with a special licence — but regulators still haven’t approved any requests for such licences, so no one in Russia has one.

We want to be a part of the digital asset market and are working on getting such a licence; we hope to get it by the end of the year. It would give us yet another asset class to offer clients. We feel there is demand from clients who use digital assets as part of their savings and investments.


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