The National Securities Commission (CNVM) has prohibited investment abroad by Romanian mutual funds. This comes despite the fact that insurance companies have been investing their clients' money on the foreign capital markets for some five years now.
This again disadvantages the Romanian mutual fund industry in comparison to life insurance companies that in recent yeas have been strongly promoting their unit-linked products as accumulation and above all investment products. Romanian mutual funds must settle for investment in shares and bonds on the domestic market until Romania joins the European Union, a recent CNVM decision made it clear.
CNVM denied the licensing application by three funds that were to be managed by CA IB Asset Management, HVB Bank's investment manager, on the grounds that their issue prospectus said they would invest on EU capital markets. CA IB Asset Management is trying to find a compromise solution so that it can launch the funds. "We are trying to find an option as to the amount of risk CNVM sees," says Florian Dolea, CA IB Asset Management manager said.
"The reason CNVM denied the licensing application is that it will be unable to properly monitor investments made on foreign markets," CNVM's spokesman, Ciprian Ene, explained.
Before publication of the new legislation, the Commission had already turned down an application by BCR Asset Management, the investment manager for Romanian Commercial Bank (BCR), which had intended to buy stock on foreign markets.
CNVM's decision to reject CA IB's licensing application is based on a section of the capital market legislation that stipulates funds will be allowed to invest on European Union markets after accession. That part of the legislation is due to come into force when Romania joins the EU. On the other hand, there is currently no legal provision that prohibits this kind of investment.
After the ordeal of the SAFI and FNI affairs, the mutual fund industry is worth around 95 million euros, with most of this amount attributable to one fund, the closed-end Depfa fund, whose assets total 57 million euros. The total assets of open investment funds amount to some 38 million euros, which is half the value of investments in the unit-linked insurance policies sold by insurance companies.
Unit-linked products are insurance policies tied to investment components that fluctuate in the same way as fund shares. Unit-linked policies are more flexible, though the risk of the investment is transferred to the customer. ING, Aviva, and Allianz-Tiriac have been selling these products for some time, with Interamerican having joined in more recently.
vlad.nicolaescu@zf.ro ; sorin.pislaru@zf.ro
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