Petre Pavel Szel: Some mutual fund managers are moving their operations abroad

The economic crisis caused a change in investment strategies for the majority of financial institutions, forcing them to reorganize according to the financial resources they have available. This trend began to manifest itself in the mutual fund sector. Some of them are now shifting the management of their Romanian investment funds abroad.

Petre Pavel Szel, the chairman of the Association of Fund Managers (AAF) and of the Financial Investment Company "Muntenia" (SIF4), said the following for BURSA: "Whereas two or three years ago, there was the issue of distinguishing between independent fund managers and those controlled by foreign banks, the main issue has now become the fact that certain fund managers are moving their operations and decision making outside Romania".

One of the first managers that followed this trend was "EFG Mutual Funds Romania". Almost one year ago, it outsourced its investment management to the Group"s asset management division, but only did so for two of its funds, FDI Bancpost Plus and FDI Bancpost Active Balanced, leaving the Romanian manager in charge of other operations.

The chairman of the AAF claims that other fund managers did the same, but did not give any names: "Another major financial group present on the Romanian market moved the management and decision-making of its funds from Bucharest to Prague, with the Romanian staff handling only marketing and counseling".

Even though BCR Asset Management which is currently undergoing voluntary liquidation, has transferred its portfolio to Erste Asset Management, in spring of 2009, its leadership says it is simply a change in shareholder structure and not a shifting of the decision making power from Romania to Austria.

Dragoş Neacşu, the chairman of Erste Asset Management, said: "The majority stake of SAI (SAI - Investment Management Company ed. note) Erste AM is owned by Erste Asset Management GmbH.

Investment decisions are still being made in Romania, we have not outsourced any of the fund management activities. We have however noticed this kind of moves in other Romanian fund managers, but things should be looked at from a greater perspective.

Some of the companies have reconsidered their business model and have decided to move some or all of their operations where resources are more plentiful, due to the financial crisis".

• The possible consequences

According to Mr. Szel, the most important consequence of the fact that some banks are trying to centralize the management of their funds is the diminishing relevance of their Romanian units: "The economic decisions are no longer being made in Romania, and the loss of control results in economic losses. The shifting of the decision making abroad lowers the relevance of the Romanian branches. The fund management operations shrink, even though the Romanian mutual fund market is expanding. Essentially, Romania"s presence in the financial industry is decreasing, which on top of that causes job losses. Essentially, as long as things are going well, everyone is happy, but when a crisis appears, things change dramatically".

However, Daniel Stifter, the general manager of "EFG Mutual Funds Romania", claims that moving the management of investment funds abroad is beneficial for their customers. "As to what concerns us, the reason behind the decision to outsource the management of investments to our Group"s specialized division was its superior level of expertise, due to the fact that it handles over 60 such investments funds with over 3 billion Euros in assets, as well the need to streamline operational costs by lower logistics and staff expenses. As to what concerns the Romanian mutual fund industry, I think that this can only have a positive effect, as the money of Romanian investors will be managed professionally at a lower cost".