Monetary investment funds, which invest in low-risk fixed-income monetary instruments, such as bank deposits or government securities, have started to lose ground fast. This is due to dwindling yields, which failed to cover the inflationary rate and are no longer attractive to investors. Such mutual funds have lost more than 5 percent of their market share in the first quarter to those investing in shares, which have been the focal point of investor interest.
Even the fund managers admit they are having problems but hope things will work out in the end. The assets of the monetary funds, a type of fund that was once dominating the market, have come to account for some 40% of the fund market at the end of March.
Most of the monetary funds witnessed yields of 3.9% to 6.9% over the last 12 months, according to the latest report of the National Union of Collective Placement Bodies (UNOPC). A banking deposit made a year ago yielded an interest of 9 to 11%, while the inflationary rate stood at 8.4% over the past 12 months.
The exception among monetary funds was BCR Clasic (over 9% yield), but this was the result of a decision to invest on the Bucharest Stock Exchange to boost its yields. Equity funds registered yields of up to 40% over the last 12 months.
Simfonia 1, the largest fund on the market managed by SG Asset Management, the specialist company of BRD-SocGen lost 3.3 million euros of its asset value in the first three months, with the market share dropping from 26% in late March to nearly 16%. Simfonia 1 remains the largest fund on the market, however.
"We mainly target small and medium-sized enterprises, which can thus manage their cash, and they have payments to the budget to make, which is one of the causes why we had repurchases outstrip subscription. In addition, investors have changed their option and chose the Stock Exchange lately," says Dan Nicu, head of SG Asset Management. The assets of the eight funds investing in monetary instruments amounted to 158 million RON (43 million euros) at the end of last year. Their assets fell to 147 million RON (42 million euros) at the end of March. Meanwhile, a ninth such fund was launched, Bancpost Plus, managed by a specialised division of Bancpost. This fund started out with an asset of 36.6 million RON (10.5 million euros).
The manager of SG Asset Management says a monetary fund continues to retain its advantages over other investment options. "Unlike a banking deposit, the investor has access to the money at all times, and it allows a certain diversification for those investors looking to reduce the risks," Dan Nicu explains.
The fund''s management fee has recently been cut to 1% a year, that is half of the previous value to provide investors with better yields. CA IB Asset Management in turn operated an approximately 25% cut of its fee to 1% a year for its Stabilo monetary fund. There are few investment options left as far as monetary funds are concerned. The Finance Ministry has not issued T-bills in well over six months, while municipal and corporate bond issues have been released even more infrequently than last year.
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