Банкеръ Weekly

Briefs

COMPENSATION INSTRUMENTS HAVE HELPED INVESTMENT COMPANIES AS WELL

By the end of 2005 the aggregate assets of open type investment companies will reach BGN100MN, the Chief Portfolio Manager of Advance Invest Daniel Ganev forecast in front of the BANKER weekly. Presently, their total assets amount to BGN36.2MN. According to Mr. Ganev, they will go up to BGN500MN by the year 2007. The increased interest towards the stock exchange is partly due to the privatisation of almost 35% of the Bulgarian Telecommunications Company (BTC) against compensation instruments of payment. Another factor that contributed to the direction of attention towards the capital market is the price of compensation instruments which soared within the last three months. When their prices exceeded their par value they proved that miracles happen on the stock exchange. Thanks to non-cash payment instruments the interest of the population outside the capital city was awaken, too. A proof of that are the constantly opening offices of investment underwriters outside Sofia. Investment companies, on their part, are convenient to innovators, seeking more secure capital investments, managed by professionals. That makes investment funds still more popular both among mass and institutional investors (pension and insurance companies). Interest is already shown abroad as well. For instance, Advance Invest has about 400 shareholders. Most of them are individual investors, and pension funds come next. There are also foreign investors from Switzerland and Germany, most of them natural persons. The oldest open type investment company in this country - Zlaten Lev - has the greatest number of shareholders, about 1,000. Funds from the USA and Western Europe are expected to invest in Bulgaria soon. Bulgarians invest less than 1% of their savings in stocks. In the European Union (EU) 22% of the savings are in securities, 20% in cash and bank deposits, 36% in real estates, and 22% in pension and insurance funds. And the citizens of the new EU member countries invest between 5% and 10% of their savings in investment companies.Although we are still far behind European practices, investment companies' assets tend to increase very quickly. For instance, in May 2004 when Advance Invest began its operation, its assets amounted to BGN2MN. Eight months later we witness an almost five-fold growth. In the beginning of 2005 the young company turned into the biggest Bulgarian fund with assets of BGN9.3MN. Next comes the former leader TBI Eurobond with assets of BGN9MN, and Zlaten Lev follows with BGN7.5MN. Elana Eurofund is fourth with assets of BGN5.4MN. Kapman Capital managed to collect assets of BGN1.9MN, KD Pelikan - BGN1.8MN, and UBB Balanced Fund - BGN1.3MN. Another indicator about the development of investment companies is their yield. Advance Invest again rates first with 38% yield. For January 2005, alone its yield exceeded 10 per cent. One of the newest open type investment companies - KD Pelikan - is the leader for the first month of the year with 18.27% yield. It cannot but be noticed that the profitability is several times higher than that from bank deposits. In 2006 investors will be able to put their money in mutual funds as well. They will be existing concurrently with investment companies. In practice, however, no new open type investment companies will be licensed, experts comment. They will not be able to transform into mutual funds, either. This ban has been stipulated in the amendments to the Public Offering of Securities Act. It should be born in mind that open type investment companies are traded on the stock exchange, while mutual funds are not. There are not substantial differences in their operation. Mutual funds, however, have a number of advantages: they are set up on the basis of agreements, which means less expenses and a shorter term before which they begin operation. That will tempt almost all managers of companies to establish two or three mutual funds - a balanced one, investing mainly in stocks, and one investing mostly in bonds.

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