OREANDA-NEWS. April 09, 2010. The mass affluent segment has survived the crisis and is expected to become one of the drivers of Russia's future economic growth

In 2009, the size of the mass affluent segment in Russia shrank from 1.2 million to 990 000 people, while the total amount of investable wealth held by this class dropped to 3.4 trillion rubles from 4.2 trillion rubles, according to the annual research conducted by the New Economic School (NES) and Citigold (Citibank's global wealth management business serving the affluent client segment) and published today.

NES and Сitigold have analyzed the impact of the financial crisis on the Russian mass affluent segment and identified new development trends. According to the results of the research, the number of wealthy individuals will return to the pre-crisis level as early as within a year. Under the optimistic scenario, it will then grow annually by 5.5 percent over the next five years. Under the pessimistic scenario, annual growth of the mass affluent segment will stand at 2.5 percent.

Zdenek Turek, Head of Citi in Russia & CIS, commented: "We have been studying the behaviour of our mass affluent clients in emerging and developed economies around the world for many years. In Russia this segment has been growing as quickly as in other BRIC countries over the past few years, even though Russians' conservative behaviour is a reminder that it is more typical of the developed countries in Europe. Another distinctive feature of the Russian mass affluent class is "patriotism" — despite the fact that affluent Russian individuals make significant investments overseas, a certain part of their wealth goes into international securities issued by Russian companies. Going forward, when the Russian private investment infrastructure reaches the international level, these funds may become an additional source of investments into the country's economy."

Sergei Guriev, Rector of the New Economic School, added: "The mass affluent segment has lost less than expected during the crisis due to its conservative investment strategy, as well as, to a certain degree, underdevelopment of the Russian financial market. Currently, mass affluent individuals generate 25 percent of the country's income and account for 30 percent of all bank deposits in Russia, which indicates the significant role they play in the country's economy. According to our estimates, the funds they have accumulated will greatly contribute to the restoration of domestic consumption and relaunching the economic growth."

The research found that nearly 70 percent of mass affluent Russians keep most of their investable wealth in deposits (90–100 percent). Wealthy investors fall into three main behavioral types. "Well-off strivers" (25–40 years old) often use zero-risk products (deposits) but at the same time are ready to try more risky investments. "Savers" (40 years and older) seek stability and invest in deposits. "Risk Takers" (40 years and older) are ready to take on risk for the sake of additional income.

NES and Citigold also found that over 20 percent of mass affluent individuals in Russia have investments overseas.

Mass affluent individuals are becoming more active in managing their investments. In 2009 they invested into the stock market independently (through brokerages) more often then through mutual funds.

The mass affluent segment includes individuals who have investable wealth of between 1.3 and 13 million rubles (as of end-2008). The wealth bounds for mass affluent selection are adjusted for inflation each year.

The number of mass affluent Russians was estimated by Pareto distribution. Sample size: 20,000 randomly selected Citigold customers in Moscow, St. Petersburg and other major cities in Russia.