Investment fund industry to boom
Budapest, 23 May 2006
The increment of social welfare, the state-secured defense against life-risk factors – that is the decrease of the roles of the central pension- and health security systems – will characterise the investment fund industry in Hungary in the middle-term – concluded professionals at the Investment Fund Conference organised by PricewaterhouseCoopers and Réti, Antall & Madl Law Firm.
Further factors can be the increase of demand for more complex savings services – not solely the simpler products –, and the growing significance of Forint-based portfolios as we get closer to the euro-accession. From the market’s point of view it is important which market participant can appear before the others with an adequate “hard-currency” product.
Marc-Tell Madl, a partner at law firm Réti, Antall & Madl Landwell believes that banks will concentrate on selling investment funds rather than on offering time deposits – this tendency can be seen already. Global participants can soon appear in the Hungarian market, while thanks to EU pressure the détente of the protectionist legal regulations, which are against EU policies, may come to force.
According to data from the end of the previous year, the accumulated capital in investment funds amounted to more than 1,800 billion Forints, from which 1,600 billion Forints was placed into Hungarian financial instruments. The distribution of funds is as follows: 33% of the fund savings go into financial funds, 26% to bond funds, 20% to real estate funds, 10% to share funds, 6% to guaranteed funds, and 5% to portfolios.
The popularity of structured funds is continuously growing. These funds include investments in partly the Produce Exchange and Stock Exchange. They combine gold, oil, stock and bond investments, since nowadays the market price of gold and oil can compensate the lower turnovers of stock investments.
In the European countries, like in Hungary too, the care of the state regarding the pension and healthcare systems is decreasing. In the future, these steps can encourage households to make pension-fund savings or health-insurance fund investments. In line with these tendencies, the life-standard in Europe will increase and households will invest most of their wealth in different investment funds.
In the forthcoming years, the financial institutions offering investment funds will need to give wider and more profound financial advice in order to understand their investors better and to understand the new products in the international financial and capital markets. This will contribute to introducing new savings funds, which have already been present in the world market, in Hungary as well.
Hungary will sooner or later access to the euro zone which means that small investors will be able to consider not only Forint but also euro investments. Sándor Vízkeleti, CEO of CA IB Rt. said about a survey that while investors in Finland mainly made Finish Mark based investments and chose domestic funds, after the euro zone accession the ratio of domestic and foreign investments balanced and amounted to 50-50%. In the long-term, the same tendency will dominate in Hungary, as well, so the wealth of Hungarians kept in foreign investments can exponentially increase.
