Aggregated News From Investment Management Regulators

After a drop of HRK 7.2 billion by April, HRK 1.7 billion of assets returned to the funds between July and the end of the year

Report/Flag

Please complete the required fields.



Published on 26. January 2021.

Open-ended investment funds with public offering (UCITS) in Croatia ended the year 2020 with total net assets in the amount of HRK 18.2 billion, which is by 19.3% or 4.4 billion less than at the end of 2019.

By the amount of these assets, UCITS thus returned to the 2018 levels.

 

After exceptionally successful 2019, in which the number of investors in UCITS increased by 4.1%, total net assets increased by 18.1% and several equity and balanced fund recorded a two-digit increase in returns, 2020 saw more concrete changes, and the funds went through four different periods of change during the year.

  1. Beginning of 2020 until 20 February – It was marked by a continued positive trend from 2019 with further growth in net assets and returns.
  2. From end of February to end of April 2020 – Due to negative impact of the sudden redemption of units by investors on the financial market, the first wave of coronavirus caused a sharp decrease in the value of funds’ assets (31.2%), that is, by a total of HRK 7.2 billion. There was a sharp 6.9% drop in average returns in March, but a slight recovery followed in April, with average returns of 2.8% in that month. At the initiative of the regulator, the Stability fund for the redemption of bonds or other market instruments guaranteed by the Republic of Croatia was then established in order to ensure, among other things, additional liquidity of funds in case of new larger pay-outs to investors.
  3. May and June 2020 – This was followed by a slowdown in the redemption of shares and a time when investors were “awaiting” further developments in the financial market
  4. From July to December 2020 – The gradual increase of new payments starts, as well as the return of some citizens to funds and the establishment of new UCITS. In this period, due to new purchases of units and a more positive market impact, net assets “recovered” by HRK 1.7 billion, mostly in December. The second wave of coronavirus and partial closure of the market did not adversely affect investors’ sentiment as in the first wave.

In the first days of 2021, Hanfa noted a continued positive trend from the end of last year, but with the widespread application of vaccines and the expectation of global economic recovery it is yet to be seen whether there will be a greater return of citizens’ interest in this type of investment, as was noticeable in the year before the coronavirus emerged, or whether the trust of citizens who have so far dominated the structure of investors in these funds will gradually return, as was the case after the global financial crisis in 2008. Another novelty is that due to the implementation of EU legislation and the situation on the money market in Croatia there is no longer a single open-ended money market fund

According to the value of units, UCITS investment funds are still significantly more invested in by citizens, accounting for 11 billion of total net assets, while more than 6 billion are held by institutional investors and enterprises. The number of units owned by citizens decreased by more than 10% in 2020.

Average non-weighted annual rate of return of bond UCITS remains positive

Uncertainty in 2020 has left a significant mark on annual returns on units in UCITS, which in 2020 recorded slightly negative average returns of -0.1%, which was by 9 percentage points lower than in extremely successful 2019. Positive annual returns were recorded by 69 and negative returns by 27 UCITS.

Bond investment funds (there are 40 such funds in Croatia at the moment and together they hold more than three quarters of total net assets (77%, or HRK 14.2 billion)) achieved positive annual returns of 0.79% on average, with a range of individual returns from -3.59% to +5.12%. These funds mostly invest in bonds, followed by deposits and money market instruments from the territory of the Republic of Croatia and other EU and OECD countries.

The average annual rate of return of +0.71% was recorded by “other” funds that invest in liquid assets of slightly lower risk (bank deposits, money market instruments and short-term debt securities), and account for 7.5% (HRK 1.3 billion) in total net assets of all UCITS. There are currently 26 such funds active in Croatia, and their individual returns ranged from -16.95% to 8.11% in 2020.

Balanced investment funds, which typically invest in several classes of assets of various risk types and hold HRK 952 million (5.4%) of net assets, achieved an average annual rate of return of 0.76% (ranging from -6.9% to 6.03%).

Several feeder UCITS funds, which invest exclusively in assets of other funds, recorded six times higher asset growth than in 2019, but not as a result of organic growth, but instead as a result of a merger of a larger fund of another category, and their annual returns in 2020 ranged between -3.07% and +2.64%.

As expected, negative returns were mostly recorded by equity investment funds, which hold 9.4% (HRK 1.7 billion) of total net assets. These funds are primarily focused on investing in shares and other risky financial instruments, and on average they ended the year with negative annual average rate of return of -2,32% and a very wide range of annual returns among the currently active 24 funds (from -18,13% to +20,88%).

Although declining, investments in bonds still dominate

Different types of UCITS invest in different financial instruments, deposits and companies and differ according to the investment structure and risk level for investors. In 2020, the nominally largest decline in UCITS was recorded by investments in bonds (HRK 4.3 billion), as well as money market instruments (HRK 0.6 billion), mostly with bond funds. Among all investments, in comparison to 2019, investments in repurchase agreements and investment funds increased. In the overall investment structure, investments in money and shares have minimally increased, but almost 65% of investments are still tied to bonds.

By total assets, at the end of 2020, UCITS accounted for 8,7% of the non-banking financial services sector, which was by 1.76 percentage points less than at the end of 2019, when they accounted for 10.4% of the financial services sector.

This news item was originally published by the Croatian Financial Services Supervisory Agency (HANFA HR). For more information, see the Source Link.

Regulator Information

Abbreviation: HANFA
Jurisdiction: Croatia

Recent Articles

The SEC Levels Up: Statement on In re Activision Blizzard

Feb. 3, 2023 Today, the Commission announced a $35 million settlement with Activision Blizzard Inc. (“Activision Blizzard”).

Mr William Stephen Cairns (date of Birth 15 January 1949) of Key West, Doyle Road, St Peter Port Guernsey GY1 1RG — GFSC

Date of prohibition order pursuant to section 33 of the Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020 and prohibited functions: From 2 February 2023 until 2 July

Mr Du Preez Gert Vermeulen (Date of Birth 5 August 1987) of Doyle Court, Doyle Road, St Peter Port Guernsey GY1 1RD

Date of prohibition order pursuant to section 33 of the Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020 and prohibited functions: From 2 February 2023 until 2 Mar

Publication of a Notice of the fact of a Prohibition Order and a Discretionary Financial Penalty — GFSC

On 2 February 2023, the Commission imposed discretionary financial penalties as follows:  Mr William Stephen Cairns (“Mr Cairns”) a financial penalty of £133,000; and  Mr Du Preez Gert Vermeulen (“M

Get the latest from Regulatory.News in your inbox!

×