JAN PRICOP, CEO OF THE ASSOCIATION OF ROMANIAN FUND MANAGERS - AAF: "The recent post-pandemic evolution is surprisingly positive in terms of the number of investors"

The recent post-pandemic evolution is surprisingly positive when it comes to the number of investors, claims Jan Pricop, the Executive Director of the Romanian Fund Managers Association (Asociaţia Administratorilor de Fonduri din România - AAF).

"Speaking of the recent evolution, perhaps due to the fact that the top 5 yields are somewhere near 40-45%, even towards 50% per year and three-year returns are similar - that is due to the correction that happened during the pandemic, a positive process that has happened is that in the last year we have added 56,000 investors to a total of 475,000 as far as we have across the market. Of the 56,000 new investors, 20,000 went for stock funds and diversified funds", said Jan Pricop.

He mentioned that that was also the positive consequence of the fact that investment funds essentially provide instant access to individuals and legal entities to diversified portfolios that they could not access if they were to invest individually by buying those financial instruments one by one. According to the AAF Executive Director, those funds are also well suited to making recurring investments over time that "practically allow us to enter the market at various moments, both when it is rising, as well as when it is going through correction, perhaps because of a temporary crisis, and which allows us to make purchases at much better prices than up to that moment".

Jan Pricop also noted that the investment fund market is very dynamic and has reached a very high level.

"We are talking about over 55 trillion Euros globally, and in Europe it amounts to over 18 trillion Euros. Obviously in Romania the scale is much more modest. We have assets of 47 billion lei, of which 24 billion lei are in open investment funds", the CEO of the AAF said.

Mr. Pricop said that the transition of the BSE to the emerging market status is also a beneficial and positive factor for the growth of the open investment fund industry.

"We want a large part of the money raised from Romanian investor to finance Romanian companies, so that we can help the country's economic development. Because at this time, a large chunk of assets have turned towards more mature markets, we are trying, ourselves together with the BSE, to change that ratio. (...) When it comes to assets, they have increased 23% over the last year, but we can also attribute that significant growth in terms of percentage to the fact that we are coming after a correction which began in March 2020, when the pandemic reached Romania. A very adequate behavior for investors would be to invest automatically. Basically, you can go to your bank and set a specific amount to be debited automatically, usually monthly or every two weeks, to a long term investment fund", the AAF CEO said.

In terms of the level of the assets of the funds compared in the population we are in our country, in Romania it is at 450 Euros per capita, compared to 900 Euros per capita in Greece, 1400 Euros in Slovakia and the Czech Republic, 1700 Euros in Slovenia and nearly 2000 Euros in Hungary.

"We are quite far from the 23000 Euro per capita in Austria, about 30,000 euros in France and Germany, 57,000 euros per capita in the Netherlands.

If we were to compare the value of assets to each country's GDP, Romania is somewhere near 4% of the GDP, and the market is split into two segments - open funds and alternative investment funds, compared to about 6% in Greece, 7% in the Czech Republic, 12% in Poland, and 125% of the GDP in Holland.

It is true, there are some differences, nuances and we need to check whether in some of those states the total assets do not contain the assets of pension funds that are practically separated because they are managed by specialized entities. We know very well that over there there are significant assets that are invested and which have automatic growth that comes from collecting contributions from the 2nd Pillar and voluntary investments in the 4d Pillar", Jan Pricop said.

The Executive Director of AAF argues that the development of the capital market can be achieved by increasing the number of investors, which can come directly or can effectively appeal to investing indirectly by buying investment funds in which they invest part of the assets in Instruments traded on the Bucharest Stock Exchange.

"Increasing the number of issuers would also be the benefit of diversifying the instruments and differentiation of funds in the same category, as in practice it can be seen that some of the same funds have the same portfolio, in different proportions, acting differently then when investing or divesting certain amounts related to these issuers", Jan Pricop said.

Mr. Pricop also mentioned that the Association of Fund Managers also has a financial education project, which is carried out through four non-financial media channels.

Through that project, AAF explains to the general public what needs to be done to save smartly. People are informed about the fact that diversification is very important to reduce risk, that investors need to have a plan which they follow strictly, that it is good to invest in the long run because the financial markets have moments of contradictory evolution, they go through times of crisis, but it has been historically proven that over longer periods - more than 10 years, certain assets bring in particular important returns, and that at the end of the period investors benefit from compounding returns.