Mutual funds that invest in shares are seeing their popularity increase among investors due to the high yields provided by the stock market in recent years, particularly with interest rates on banking deposits having remained in single-digits for several months.
Mutual funds that invest a significant amount of the money attracted from investors in listed shares on the Bucharest Stock Exchange reached a 43.6% market share at the end of August, compared with only 30.9% earlier in the year. The increase in market share for equity funds brings the mutual funds market in Romania closer to that in Europe, where most funds are equity funds.
Fund managers expect equity funds to grab half of the market by the end of the year, since investors are shifting to placements that bring them higher yields.
The increased importance of stocks to fund portfolios came on the one hand as a result of the increased value of fund shares and the attraction of new investors by fund managers. On the other hand, the increasingly fierce clash over attracting new investors has seen management companies allocate increasingly larger shares of their money to stock market investments.
An even higher increase than the market share increase for equity funds was seen for investments as a proportion of total investments by the funds. While stocks accounted for a mere 5% of total fund investments earlier in the year, they now account for more than 13%, as seen last month. Not even the most aggressive equity funds can invest all their assets in shares since they need cash reserves to meet redemption demands.
"The more visible presence of these funds is mainly due to yields, as some investors will only consider this aspect, without taking the associated risk into the account," said Doru Puiu Tiberiu, head of BCR Asset Management.
"Mutual funds that invest in stocks have gained ground on monetary and fixed income instrument funds, given the rise in investors'' appetite for risk and their desire to make higher yields. Equity funds were the top performers in the first half of this year, while monetary funds did not exceed the rate of inflation. Given the situation, investors have begun to prefer diversified and equity funds, and fund managers focused on this segment," explained Dorin Danescu, general manager of SIRA, the investment manager of Omniasig.
Diversified and equity funds generated above average yields of over 14% in the first eight months of the year, while funds investing in bonds posted an average performance of 7.6%, with monetary funds generating 5% growth to investors, less than the overall rate of inflation for January to August of 5.2%, according to data provided by the National Union of Collective Placement Bodies (UNOPC).
Fund investors expect the rise of the equity funds to continue, since investor interest in these options is also on the increase.
"I am convinced the equity funds will continue to grow and reach 50% of the mutual funds market by the end of the year, given that funds that invest in fixed income instruments only have a few placement options and monetary funds cannot outrun inflation given the drop in deposit rates," Danescu said.
Experts say the yield is the decisive factor in influencing the choice by investors between diversified or equity fund, with risks being considered less important.
"It all starts with the yield. Romanian investors do not set a term for their investments. They want growth every day. This is why we could see the emergence of the first speculative equity funds," added the SIRA manager.
vlad.nicolaescu@zf.ro ; andrei.chirileasa@zf.ro
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