As shown by a new international study, the volume of private capital in our country over the past five years has increased faster than the average in the world. What can the growth of financial well-being lead to – in the material of Izvestia.
They love money and deposits
Over the past five years, the volume of private capital in our country has grown faster than the world average, and has reached $1.6 trillion, according to the findings of the study by The Boston Consulting Group (BCG) “Global Wealth 2021” (available to Izvestia). BCG calculated that the financial assets of Russians in the period from 2015 to 2020 grew by 11.3% annually. “The average growth rate of financial wealth in the Russian Federation in 2019–The 2020s are ahead of both the Eastern Europe region and the world average and make up 13% compared to 12% and 8.3%, respectively, “- emphasize analysts of the international company, which is one of the” big three management consulting “.
At the end of last year, the segment of the super-rich with fortunes of $100 million – 40%. At the same time, the “mass” segment of fortunes – up to $ 250 thousand – is in second place with a share in the total volume of 38%. It is also the most numerous – 114.6 million people in 2020. The category of “wealthy” Russians with a fortune of $ 250 thousand to $ 1 million includes 192 thousand people with a share of 6%. And in the segment with a high level of income were 56.7 thousand Russians (16% of the total).
Photo: Izvestia / Pavel Volkov
The study also showed that in terms of asset classes, Russians still prefer cash and deposits (61%), while the share of equity capital fell from 27% in 2019 to 25% last year.
– On average in the world, these two assets in 2020 amounted to 28% and 38%, respectively, with the share of equity capital remaining the largest with a forecast of an increase of up to 40% in 2025, – explained in BCG.
– The outstripping growth in the presence of households in Russia in the securities market is associated with the existing lag in this earlier, and this is also associated with a large share of deposits of Russian households in comparison with other financial assets, – says Alexei Timofeev, president of the National Association of Stock Market Participants. – In essence, there is an increase in volumes and a redistribution of financial assets in household portfolios – the share of securities is growing, the share of deposits is decreasing, becoming closer to the world.
Vitaly Arbuzov, a member of the general council of Delovaya Rossiya, explains this growth by the fact that people simply began to show their capital.
– In particular, make deposits, invest in companies or buy assets on the stock market. Initially, this capital was, but was not taken into account. And this, perhaps, is one of the key points of capital growth in our country according to statistics, – noted Arbuzov. He added that the growth in capital is also due to the fact that a large number of IT startups appear in the Russian Federation, and technological production is increasing.
“The trends are primarily traced to work with the state, official work, the transfer of business from the shadow sector of the economy to the white,” says a member of the General Council of Delovaya Rossiya. – In general, this is certainly a good and positive effect on our economy, because more and more money will be controlled by the state, which will cause economic growth.
Further growth forecast for the period up to 2025 for Russia should be 6% per year, which is higher than the world average of 5% and below the Eastern European level of 7%. The country’s financial assets, according to BCG experts, will reach $ 2.1 trillion by 2025. By the same time, the number of “wealthy” Russians will increase to 263 thousand (now there are almost a third less of them), and the number of the super-rich will increase from 500 to 700 people.
The BCG analysis creates a too fragmented picture of the distribution of financial assets in Russia, says Kirill Borisov, professor at the Faculty of Economics at the European University at St. Petersburg. According to him, “about 500 of the richest people in our country own more financial assets than the 114 million attributed to the mass segment.”
“At the same time, the concept of a“ mass ”segment – those who own assets of less than $ 250 thousand – contains a certain slyness, Borisov believes. – The overwhelming majority of those included in this segment have practically no financial assets. Moreover, there are a large number of those who are in the red.
Photo: Izvestia / Sergey Konkov
The debt burden of citizens is growing at a fairly rapid pace, the expert continues. According to Borisov, “in general, the inequality in the distribution of wealth in our country is a matter of concern.” Indeed, the wealth of many seems to be undeserved, which undermines confidence in the market economy as such and the institution of private property.
Unfortunately, today the indicators of social inequality in Russia are one of the highest in comparison with developed and comparable countries. Thus, the Gini coefficient, which shows income inequality, in Russia is 0.4, while in the EU as a whole – 0.31, in Germany – 0.28, in Japan – 0.25. Even in India, which is considered an example of a country in which problems of social inequality are particularly pronounced, the coefficient is 0.37.
– Social inequality in our country is a multifaceted issue, including the development of social lifts, increasing the availability of quality education regardless of family income and place of residence, job security not only in large cities, retraining and additional qualifications for a person of any age and social status, – points out the associate professor of the Financial University under the government of the Russian Federation Petr Shcherbachenko. – A good tool for this can be the social responsibility of business, including social and environmental programs, the development of the ESG (environmental, social and governance) index with the obligatory development of a motivation system for companies.
The record growth of private capital in Russia compared to the world is obviously explained by the growth in the value of shares of companies in a number of industries, Shcherbachenko believes. The sector of Internet companies showed strong growth. The pandemic brought windfall profits – primarily due to price increases, which in some cases were associated with lower supply (for example, non-ferrous metallurgy), in others – with increased demand (for example, pharmaceuticals).
– I can assume that the state will be forced to restrict the withdrawal of funds from Russia abroad, – says Shcherbachenko. In this situation, it is necessary to develop an opportunity for businesses to minimize the risks of losing their assets within the country and to stimulate their investment in Russian assets and projects.
Olga Meshcheryakova, General Director of Peramo Invest Management Company, notes that “the average world statistics in itself are less volatile due to the fact that a significant increase in indicators in developed countries is offset by an even sharper fall in the poorest countries. Therefore, it cannot be used as a relevant benchmark.“. Much more informative, she said, is the fact that the growth rates of financial well-being in Russia are in the same range as those in Eastern Europe.
Indeed, in 2020, despite the impact of the pandemic, global wealth has grown significantly. The reason for this was that the central banks of different countries were actively printing money to support the population and business, and the risks of the real sector that increased during the lockdown and the protracted drop in deposit rates encouraged the influx of private investors into the stock market in search of higher profitability and liquidity.
Photo: Izvestia / Sergey Konkov
The Russian regulator did not lag behind world trends – the money supply in the national definition in the Russian Federation grew by 13.5% in 2020, most of these funds eventually concentrated among wealthy fellow citizens, who are mostly employed in the public sector and big business.
The flow of funds from deposits to the stock market caused a significant increase in the latter. (The Moscow Exchange index rose from 2112 points in March 2020 to 3843 points at the current moment). The increase in volatility in financial markets due to the pandemic has led to an unprecedented influx of private investors: their number on the MICEX increased by 4.9 million people over the past year (+ 128%).
Alexey Soloviev, a venture investor and founder of the investment company A.Partners, agrees that the growth of capital in the Russian Federation is associated not only with the fact of their increase, but also with the fact of their legalization. In recent years, phenomena have been taking place in our country that affect the fact that these capitals have become more visible. They return to the country due to the difficulty of using them in tax havens and offshore jurisdictions.
“This is rather good, as people have a demand for new effective instruments for capital allocation,” explains Alexey Soloviev. – The demand for investment and financial and investment services for the private sector has definitely grown. Wealthy people are looking for new ways of investing within the country – one of these tools is venture capital investments in technology projects, which has a positive effect on the development of the economy.
The BCG report highlights a range of trends, says the vice-president of “Business Russia” Daniil Nametkin… First, it is an extremely high share of cash and deposits in the structure of private capital. In Russia, this indicator has remained unchanged since 2015 – at the level of 61–62%, while in developed countries this figure is at the level of 27–28%, in other Eastern European countries it does not exceed 50%. The second trend that should be noted is the high level of social inequality in Russia. According to BCG, less than 500 people own 40% of private capital in Russia, and 60,000 rich and super-rich (that’s 0.04% of Russians) account for 66% of financial assets.
“Actually, when we talk about the growth of private capital, we, in fact, are talking about the growth of wealth of 0.04% of citizens,” says Daniil Nametkin.
– All this signals a number of problems typical for the Russian economy: this is the conservatism of private investors, which is one of the reasons for slow economic growth, insufficient development of infrastructure for investment in Russia. – says the vice-president of Delovaya Rossiya. – This is also the emphasis on the payment of dividends, rather than channeling funds for the development of the company, which has been more and more pronounced in the distribution of corporate profits in recent years.
Photo: Izvestia / Pavel Bednyakov
But it seems that not everything is so sad, because Recently, Russia has seen a sharp increase in the number of private equity investments, says Mikhail Prepelitsky, founder and managing partner of Preppy LLC. Thanks to modern technologies, the entrance to the stock exchange has opened up for millions of Russians, who often decide to buy shares of a company based on its media activity and presence on social networks. And this is a new reality, which market leaders will have to adapt to, otherwise sooner or later they will lose in the competition for attracting private capital, Prepelitsky warns.
Be that as it may, says Alexander Shadrin, head of the analytical service of Dohod Management Company, “private capital is a resource for creating new products and businesses.” And the development of new industries, structural changes in the economy and life, a decrease in monopolization and state pressure will help overcome unemployment and stratification in the Russian Federation. And one of the most correct decisions in favor of social balance is a progressive tax scale, summarizes Evgeny Shilenkov, Director of the Department of Active Operations at IC VELES Capital.