Romanian mutual funds market enjoys fourfold increase

Persistently high interest rates, the almost constant growth of the Bucharest Stock Exchange and a slight improvement in investor perceptions led to a fourfold increase in the value of assets managed by Romanian mutual funds last year.

The mutual funds market exceeded 100 million euros at the end of 2004, having reached 4,643bn ROL (120 million euros) by the end of December. Mutual fund net assets one year ago amounted to a mere 1,180bn ROL (21.7 million euros). As a result, mutual funds are slowly regaining their status as an investment option for savings, after the crashes of FMOA in 1996 and FNI in 2000 led most investors to steer clear of fund managers.

“Investment funds are increasingly being seen as a viable investment option. Maybe the decline in interest rates had something to do with the growth in the funds market,” says Dan Nicu, chairman of the National Union of Collective Investment Entities and general manager of SG Asset Management, BRD-SocGen’s investment management company.

The increase in the number of investors was less impressive than the increase in assets at only 7%, up to a total of 62,000, since investors are still wary of investing in funds.

“The entire mutual funds industry is still suffering the aftermath of the 1996 and 2000 crises,” says Doru Puiu Tiberiu, head of BCR Asset Management, Banca Comerciala Romana’s investment management arm. According to Tiberiu, investor confidence is rising, with an increasing number of investors looking for more sophisticated products than banking deposits, particularly after the fall in interest rates.

The increase in assets last year was in large part due to foreign investors speculating on the gap between the interest rates for the ROL and the lower interest rates for euros and dollars, at a time when the ROL was gaining strength. German DePfa Bank invested approximately 65 million euros in a mutual fund that later turned into a closed fund managed by a company in which the bank is a shareholder. Capital market sources say several foreign investors have invested with another monetary fund, Simfonia 1, which is managed by SG Asset Management. SG Asset Management representatives declined to comment.

Foreign investors attracted by the high interest rates on the ROL were joined by a series of Romanian companies that began buying shares in monetary funds instead of making deposits with banks.

On the other hand, say fund managers, individuals are becoming increasingly interested in funds that, among other areas, invest on the stock market, driven by the desire to make more money, despite the risks being theoretically higher.

“BCR Clasic, a monetary fund, has about 70% of its shares held by legal bodies that invest their cash. BCR Dinamic, which also invests in stocks, has 90% of its shares held by individuals. They (the individuals) are choosing stock market funds more and more often because they want higher gains,” explains Tiberiu.

Rates of interest of up to 20% on investments such as bonds, banking deposits and government securities, and inflation of less than 10%, last year guaranteed that no fund posted growth below inflation as in previous years.
vlad.nicolaescu@zf.ro