Wealth in Russia: Sizing the Market Opportunity 2016

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The performance of the Russian liquid wealth market is driven by strong growth in the retail savings and investments market. Given the predominant allocation in deposits, year-on-year growth has depended primarily on GDP and wage growth, which in turn have been influenced by commodity prices. While HNW wealth is forecast to record a compound annual growth rate (CAGR) of 12.3% between 2016 and 2020, the rest of the country’s affluent population is expected to develop at a slower pace.

Scope

Verdict Financial’s “Wealth in Russia: Sizing the Market Opportunity 2016” analyzes the Russian wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.

Specifically the report:

– Sizes the affluent market (both by number of individuals and the value of their liquid assets) using our proprietary datasets.

– Analyzes which asset classes are favored by Russian investors and how their preferences impact the growth of the total savings and investments market.

– Examines HNW clients’ attitudes towards non-liquid investments such as property and commodities.

– Identifies key drivers and booking centers for offshore investments.

– Examines the tax landscape in Russia and future implications for investors.

Reasons to Buy

Benchmark your share of the Russian wealth market against the current market size.

Forecast your future growth prospects using our projections for the market to 2020.

Identify your most promising client segment by analyzing penetration of affluent individuals in Russia.

Evaluate your HNW proposition by understanding how the Russian tax system impacts HNW clients.

Review your offshore strategy by identifying HNW motivations for offshore investments and their preferred booking centers.

Citibank
Evraz
Gazprom
Lukoil
NMLK
Rosbank
Rosneft
Société Générale
UniCredit

Table of Contents

EXECUTIVE SUMMARY

The Russian wealth market is set to record a CAGR of

12.3% to 2020

Key findings

Critical success factors

SIZING AND FORECASTING THE RUSSIAN WEALTH MARKET

Affluent individuals will represent 3% of the adult population by 2020

97% of total liquid assets are held by affluent individuals

DRIVERS FOR GROWTH IN THE RUSSIAN WEALTH MARKET

Russia's retail savings and investments market is forecast to grow

Russia is dominated by deposits, reflecting an underdeveloped securities market

Deposits will continue to drive the Russian retail savings and investments market

Deposits growth will continue to outperform GDP

Interest rates have limited impact on demand for deposits

Oil producers and Western sanctions impact the Russian bond market

Steady growth is forecast for Russia's bonds

Equities and mutual funds are driven by the performance of the stock market

The Russian market has displayed favorable growth in 2016

Equity and mutual fund holdings have broadly followed the MICEX

HNW INVESTMENT PREFERENCES

HNW individuals allocate

14.5% of their investible assets outside of traditional investments

HNW investors allocate almost half of their non-traditional investments into property

Russian millionaires prefer alternatives to commodities

Russian HNW individuals have a significant propensity to invest offshore

The majority of offshore wealth is kept in bond investments

Access to a better range of investments is the major driver of investing offshore

Singapore, Switzerland, and the UK account for

71.5% of offshore bookings from Russia

Taxation in Russia

APPENDIX

Abbreviations and acronyms

Supplementary data

Definitions

Affluent

Domicile

DTC

FATCA

HNW

Liquid assets

Mass affluent

Mass market

Onshore

Residency

Exchange of information

TIEAs

Methodology

2016 Global Wealth Managers Survey

Verdict Financial's Global Wealth Model methodology

Global Retail Investments Analytics methodology

Exchange rates

Bibliography

Further reading

About Verdict Financial

Disclaimer

Table

Table 1: Total Russian adult population by asset band (000s), 2011-15

Table 2: Total Russian adult population by asset band (000s), 2016f-20f

Table 3: Total Russian onshore liquid wealth segmented by asset band ($bn), 2011-15

Table 4: Total Russian onshore liquid wealth segmented by asset band ($bn), 2016f-20f

Table 5: Russian ruble-US dollar exchange rates, December 31, 2014 and December 31, 2015

Figures

Figure 1: Affluent individuals account for 1.6% of the Russian population

Figure 2: HNW individuals account for 36.7% of Russia's total liquid assets

Figure 3: Moderate growth is forecast for Russia's retail savings and investments market

Figure 4: Russian HNW individuals will increase deposit and decrease mutual fund allocations

Figure 5: Future growth will be driven by bonds and deposits

Figure 6: Steady GDP growth will contribute to more stable deposit holdings

Figure 7: Moderate growth is expected for Russia's bond market

Figure 8: MICEX index weightings are strongly concentrated around the energy sector

Figure 9: Stock market performance highly impacts the growth of equities and mutual funds

Figure 10: 85.5% of Russian HNW wealth is held in traditional liquid allocations

Figure 11: Russian HNW individuals hold nearly half of their liquid wealth offshore

Figure 12: Access to a better range of investments and geographic diversification are the leading motivations for offshore investments

Figure 13: Europe accounts for over three quarters of Russian HNW offshore bookings

Figure 14: Russia has DTCs with a vast number of countries around the world

Frequently asked questions

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