TWO Russian miners are set to join the FTSE 100 next month, reigniting concerns over corporate governance and the composition of the index.
Roman Abramovich’s steelmaking group Evraz and gold miner Polymetal will both join the index if the FTSE Group agrees at its next meeting.
Evraz, with a £4.7bn market cap, and Polymetal, at £3.5bn, are likely to displace Investec and Inmarsat, Numis analysts said, despite Evraz having only 23 per cent of its shares in the hands of minority investors.
If Polyus Gold, a third Russian miner, makes it into the FTSE 100 it could bump Hargreaves Lansdown down to the FTSE 250. Polyus plans to list just 20 per cent of shares, prompting a backlash from some institutions.
Some think that listing a small free float can be a tactic to ensure shares are largely mopped up by passive index tracker funds mandated to invest in every FTSE 100 stock, causing the price to keep moving up as buyers outnumber sellers.
But the companies’ inclusion in the index is causing headaches for fund managers that see them as a risky bet.
Karina Litvak, head of governance at F&C Asset Management said in a letter to the Financial Times that the FTSE 100 “has progressively admitted a disproportionate share of extractive companies based in jurisdictions where rule of law is often called into question” – and small free floats “raise fresh concerns about the rigour of the listing process”.
The fears have been echoed in a new PwC survey of the small-cap Aim market in London, which has no minimum free float limit. Just 15 per cent of fund managers said they thought a free float of less than 25 per cent was appropriate, and more than half wanted a 26 to 50 per cent free float level.