STK: Closed-end funds generate aggressive growth

Nicolae Pascu, the chairman of STK Financial, says the strategy of the investment management company will focus especially on closed-end investment funds and not particularly on mutual funds, as he is not confident in a high growth pace of the open-end fund market.
STK chairman considers the mutual funds do not have a well shaped market at the moment, while the slow growth pace he estimates this market will witness over the following years, cannot ensure a more “aggressive” rise for the company he runs.
STK Financial is a company based in Cluj-Napoca that has recently entered the investment management service market, being licenced at the end of last year. Nicolae Pascu, who was the former main analyst at Broker Cluj, is also one of its founders.
The company launched its first private investment fund this April that will be listed on the Bucharest Stock Exchange, with net assets worth 20 million RON (5.7 million euros). The fund, called STK Emergent, was set up by raising private financial resources from approximately 100 investors.
“The mutual fund market is small, and I think the growth rates will be maintained at a low level in the following years. Some players have also done good things on this market lately, as a stronger positive publicity has been noticed, yet I think the amounts of money attracted are still rather small,” says Nicolae Pascu.
“At the same time, given the reported amounts, one can not tell how much comes from the retail segment and how much from the institutional investors, as there are no clear statistics in this regard, and the mutual funds are dedicated to retail,” added Pascu.
Mutual funds’ assets amounted to only 152 million euros in late September. Many of the managers of fund management companies estimated the market would reach 1 billion euros over the upcoming three years, yet Nicolae Pascu says that, given the correlation between the present situation and the macroeconomic indicators, the mutual fund market is not going in the right direction so as to reach this level over the quoted period.
Since its launch this April, the STK Emergent fund has advanced by 22.66%, whereas the BET index rose by 11.1% over the same period.
STK management targeted for this fund a return on equity of minimum 25% per year and a 1.3 – fold rise in net assets, against the increase posted by the BET index. Besides this fund, STK Financial is currently managing individual accounts, as well.
According to Nicolae Pascu, one of the reasons for such a low level of the mutual fund market is the funds’ performance, which in most cases saw rises below the one posted by the Stock Exchange.
“The current mutual funds are not dedicated to the real needs of investors. At the moment, there are too few investors concerned with preserving their wealth. They look for yields which are beyond the rise of the Stock Exchange and they are ready to take great risks for this purpose,” adds Pascu.