There is the need of a more refined perspective when addressing such investments in different types of funds, that of putting the things into perspective. The Romanian investors still do not access the international capital markets in order to better align the investment approach to a different, more complex perspective.
The local investment funds market, estimated at around 2 .1 billion Euros is represented by an overwhelming majority of 90 percent by the retail clients of the banks invested in fixed income low volatility funds and only roughly 10 percent of assets invested in higher potential return genuine investment funds.
THE CONSERVATIVE TYPE OF INVESTOR
Looking at current fund flows, the former communist block except Poland is now not appealing for large asset managers. And, analyzing the present landscape of this market, I would say it is rather difficult for a manager of foreign funds to breach locally, since the penetration “power” of an asset manager on a certain market is determined mainly by the maturity of the market and the strategic positioning of its distributors. Thus, the local market is mainly consisting of former money market funds, sold as a form of savings quite similar to a bank deposit. To make a difference, we strive to focus on promoting funds with volatility, able to generate returns over the market. These funds do not attract high flows from local investors but instead, they might deliver higher performances and make the difference on the long run.
Being a global investment fund manager, we manage investment products with assets worth over 200 billion EUR. We run two types of fund classes, tailored for two different types of investors, first layer with a more conservative profile, saving in RON (mainly wishing to preserve capital in conditions of low volatility of fund unit value). This kind of investors, such as risk averse individuals and companies look at the short and medium term liquidity and exhibit a reduced appetite for risk; and second layer consists of investors who want diversification of their investments in terms of foreign currencies, geographies, various financial instruments and risk profiles.
The investment policy of the most conservative fund - STABILO aims at structuring investments predominantly in debt securities market. This fund encompasses over 1,500 clients and mainly targets local government bonds, while the second type of approach is a wide range of international funds, domiciled in Luxembourg, denominated mainly in Euros and US Dollars.
The second type of funds addresses all types of investors, especially those willing to pursue a dynamic approach on portfolio gains and risk. The main objective of the International Funds is to achieve capital growth under various risk profiles as highlighted above. All investments made by the funds are based on prudent portfolio diversification. So, roughly half of our sales volume comes from the most conservative fund, and a profile of its customer would be: the investor willing to deposit, targeting savings. The other half of our sales volume comes from the wider range of International Funds which we promote through our well positioned distributors, targeting more sophisticated clients. Our main job is to place our investor’s money in safe opportunities with long-shot earnings , rather than short-term risky opportunities. Just as an example, being fixed income generators, the bonds have been the most “fashionable” investment vehicles these years after the crisis, also propelled by the constant yield compression in the international debt markets. Very few local investors could have benefited from such trend, mainly because of financial unawareness.
SEVERAL TRENDS IN BANKING RIGHT NOW
- Stable banking block: There are estimates of around 8 – 10 large banks that form a stable block on the local financial and banking market.
- M&As at smaller level: As a market trend, potential takeovers or mergers would be possible in the segment of smaller banks.
- The evolution related to financial / consumer retail is still slightly decreasing.
- There is a tendency of net interest decrease on the saving side which is not clear whether would have an impact on the credit side in terms of interests.
While regarding the up trends,
- The corporate loans are stable in this segment.
- The asset management segment sees also a growth both on the retail and institutional side of the market.
LOCAL INDUSTRIES WITH POTENTIAL
There is a segment of energy which has a large potential of growth, that of micro hydroelectric power stations. This is a sector with entrepreneurial potential, a rather untested segment in Romania. Besides, other major industries as the most mentioned agriculture or IT, is that of business consultancy. Unfortunately, Romanian entrepreneurs don’t hold the necessary financial resources in order to address this segment. Regarding the local capital market, Romanian Stock Exchange holds the main investment potential for major investors, but the cut-rate of the listed shares and the diminished liquidity counterpoises the competitive advantages of local equity & bond markets. The job of an investment fund is to find opportunities where to place money, no matter the market, be it local or international. The higher the potential long term earnings, the bigger the risks, but beware, on the short run, the investors expose themselves to the possibility of significant disappointments.
EURO AREA: A TURNING POINT
Following our Outlook on 2013 published at the beginning of this year, “economic growth should bottom in 2013, showing a modest recovery in the second part of the year” as the report reads. We expect a positive GDP growth for 2013, with significant dispersion of economic performance among different countries.
Also, after avoiding the tail risk related to the Euro break-up, the ECB should continue to maintain an accommodative stance (supported also by a benign inflation trend), with the primary aim of restoring normal credit conditions in the peripheral countries. The banking union could be a positive step in this direction and to restore a unique Euro credit market. In our base scenario, the progress towards a more resilient and integrated institutional framework could proceed, amid volatility and fatigue. The reform agenda implemented by single countries should unlock significant medium- long term GDP growth potential, while in the short term it might slow down ahead of elections in Italy and Germany.
The forecast for 2013 regarding Eurozone takes into account a possible modest recovery that should materialize in the second half of the year, with still significant dispersion in economic performance of different countries.