A Russian court ordered PioGlobal Asset Management to pay a domestic pension fund the returns it had guaranteed, despite a 77 percent fall in the stock market last year, Kommersant reported on Monday. The business daily said PioGlobal said the market collapse constituted force majeure. The court awarded TNK-Vladimir 230 million roubles ($6.88 million), Kommersant said.
The pension fund had been seeking 294.5 million roubles, the court's website said. Other Moscow fund managers and investors see the case as a litmus test for the many Russian asset managers who offered guaranteed returns to pension fund clients, but were hard pressed to make the payments after the collapse of the Russian stock market.
A raft of similar awards could deliver a fatal blow to some members of Russia's crippled domestic investor base, leaving even less long-term money available to invest in Russian markets, dominated by foreign investors and local speculators. Russia's investment community says it sorely lacks a significant base of long-term investors such as pension fund contributors and other retail clients to smooth out volatility and create a long-term base for gains.
Neither PioGlobal nor the plaintiff TNK-Vladimir, part of oil company TNK-BP's employee pension system, were immediately available for comment. The Moscow Arbitration Court website said a hearing was held on April 16 but did not specify an outcome. The paper quoted PioGlobal chief executive Sergei Surov as saying the asset management company would appeal.
"The 230 million roubles we were ordered to pay in the court decision is at least close to the current value of the portfolio. The difference is about $1 million but we are unable to cover it with our own funds," Surov was quoted as saying. The case is being closely watched by other asset managers, Kommersant said.
"If funds start mass lawsuits demanding immediate return of invested funds and guaranteed minimum returns, many asset managers will simply go bankrupt, because last year's losses are greater than their available cash resources," Roman Sokolov, the managing director of local investment bank Otkrytie, was quoted as saying.