The development of forms of institutional investment and their role in the mechanism of raising capital for the domestic economy

Abstract

One of the important contemporary problems is to provide sustainable economic growth by attracting investment capital to all sectors of the national economy. According to world experience, the main role in this process belongs to the securities market. It is an important tool for the development of the national economy, as it promotes the redistribution of capital between its spheres and industries. Institutional investors as professional financial intermediaries play a decisive role in the mechanism of capital flows allocation. Collective investment institutes are large-scale financial institutions that accumulate significant amounts and manage them. The article investigates the role and importance of institutional investors as a special type of financial intermediaries in the Ukrainian financial market. Institutional investors are professional participants of the stock market and financial intermediaries between citizen’s savings and the investment needs of the domestic economy. Their mission is to promote the more effective realization of the function of transforming savings into investments. Significant amounts of free cash owned by small investors and the large needs of a real sector of the economy in free investment resources require the search for effective means of fundraising from small owners to collective investment institutions. The importance of institutional investors activity is great since they are the leading suppliers of investment resources in the country’s economy and determine the level of its economic development. The trends and results of Ukrainian institutional investors activity over the last five years is investigated in the article. From the quantitative side, the collective investment institutions are the dominant kind of institutional investors in Ukraine, and their number is constantly increasing. For the beginning of 2018, 292 asset management companies, 235 collective investment institutions, 58 non-state pension funds and 3 insurance companies with assets in AMC management were registered in Ukraine. We can see the largest increase in the value of assets in non-diversified investment funds – 146.3%. At the same time, mutual funds increased on 23.8%. However, this is not enough for the Ukrainian stock market. A small number of derivatives in circulation and low liquidity of securities restrict the activity of domestic collective investment institutes. The critical analysis of the long-term working practices of Private joint stock company «KINTO» is performed. PJSC «KINTO» is one of the most successful asset management companies on the domestic securities market. Currently, PJSC «KINTO» is an investment manager of twelve investment funds and one non-state pension fund. Asshown by analysis, the final financial results of the collective investment institutes (CII) depend on the choice of investment strategies. The features of the use of various investment strategies by CII at the stock market are investigated. It is proved that the passive-active strategy using is the most effective because of maximizing income while minimizing risks in the medium and long-term. To achieve this aim, the majority of investment funds of AMC «KINTO» forms a diversified investment portfolio based on the securities of the most investment-attractive companies of the real sector of the economy, belong to the «blue chips» of the domestic stock market. Also, the company «KINTO» uses all advantages of collective investments by applying both different trading platforms and investment instruments (instruments of stock, bond and money markets). Key words: institutional investors, net asset value, closed-end non-diversified corporate investment fund, interval diversified unit investment fund.