Apart from some domestic banks with majority foreign ownership and brokerage houses, there are also Slovenian and Croatian investors interested in forming funds
I expect that Raiffeisen Bank, as a sole founder of the Investment Fund Management Association will by the end of this quarter receive a licence and that we will, after the foundation of the Voluntary Pension Fund start with the work of the investment fund, says for Magazin "Biznis" Zoran Petrović, member of the Managing Board of Raiffeisen Bank.
Agreeing with the statement that the enactment of the Law on Investment Funds was late in relation with the surrounding countries, Petrović states that by-laws have also been enacted shortly before the very start of its application.
– Commission for Securities, under whose jurisdiction the enactment of regulations for the application of this Law took a longer time to conclude the business because a completely new area for all participants is being dealt with. In the middle of December we received all the by-laws and now a legal frame has been created for the work of investment funds in our market.
As far as Raiffeisen Bank is concerned, already since March and April last year we have started preparations for the foundation of the fund. We have created the nucleus of the team which composed the feasibility study. On adoption of the study on the part of the Board of Directors we have started its implementation. Conditions have been created and we have only been waiting for by-laws. Of course, not everything is finished, there is still much to be dealt with, from personnel to information technology work.
We will make effort to apply the extensive knowledge which exists in this sort of business in our group, while observing the legal framework. I would like to mention that Raiffeisen Capital Management manages assets of over 42 billion euros.In other countries’ experience, for a market such as ours, an ideal number of investment funds is seven to ten. What kind of competition do you expect?
– I think that the competition will be tough. I believe that a few requests for permission for operation of management societies have been or will soon be filed, so by the end of this year between five and ten investment markets should appear on the market. What they will be like and how they will work is left to be seen. I only know that besides some domestic banks with majority foreign ownership and brokerage houses there are also Slovenian and Croatian investors interested in forming funds.What kind of fund has Raiffeisen Bank opted for?
– We will most probably start will a fund carrying a bit higher risks, although it is customary, at least that is what the experience of countries in transition shows, to start with monetary funds, and only then turn to growth funds, i.e. share funds. However, I think that in Serbia there is no time like the present to start in a different way and that others will have a similar reasoning as well.The banks have so far collected quite a substantial amount of savings of the population. Will the investment funds in future be a great competition to banks when it comes attracting those savings?
– Of course, but the position of the banks will in future to a great extent depend on what the saver wants. Simply, those who are more inclined to risk will invest into funds, those who like to play safe will continue saving in banks, because their revenue is certain there. With the improvement of standard but also the fall in interest rates in banks, the number of those who will see investment funds as a solution for the investment of excess of disposable assets. As far as the banks themselves are concerned, especially if they are also the founders of investment funds, for them it is ultimately all the same what their clients’ reasoning will be. For a bank it is important to develop its client base, to widen its range of services offered to clients and ensure a longer-term returns. As far as its proceeds are concerned, it is always in the margin and there is no difference as to whether it will be realized from the deposit or the fund.One of the apprehensions related to investment funds is that it will be an outlet for capital outflow abroad. Are such suspicions justified?
– As concerns possible investments into securities abroad, two laws regulate that issue – Law on Investment Funds and Law on Foreign Exchange Operations. The fear expressed over the possible capital outflow is unnecessary. If we look at the experience of Central and Eastern European countries, no one can complain that there are insufficient monetary sources. Therefore I believe that liberalization of capital transactions can only help us as well because a part demand in the country will be lessened, although I do not think that a more significant capital outflow will take place. Those who so far wanted to take it out of the country have surely found means of doing so.Many experts maintain that precisely Serbian market can yield great profits and that therefore money should be invested there. Do you agree with them?
– This market is only commencing. That it has a potential is also shown by the fact that a greater part of trade on the stock market is realized by foreign investors. Returns are still very good, which is shown by the growth of stock market index numbers. Although I would not dare predict what the volume of profits will be in future, this market certainly promises high profits. Of course, what we need is depth, liquidity of the market, that is to say more market material, and in the average term of three to five year there should be expected an increasing number of private companies that will be thinking of opening up, of diversifying sources of finance, of not making the credit their only way of ensuring the necessary means for their development but also of doing that by the issue of their stocks, even that they can use the issued shares as an acquisition currency for their business, for taking over other companies. Of course, there are different debt instruments. In any case I believe that in mid term we will see on initial public bids companies that have good products, balances, management, development strategy and market.Who will be the greatest winners when the investment funds start working seriously?
– Benefits will be manifold and will apply to all participants, above all to the potential investors, because assets management will be entrusted to professionals on the basis of a public prospect containing all the necessary data on the fund and the fund management associations which are counting on profits will benefit as well. From the operation of such financial institutions future issuers of securities, regardless of whether they are shares or debtor securities will profit as well – a market is developing on which they can market their securities and ensure the necessary financial assets. In short, the experience of other countries is very good, it has been proven that all the three parties in the investors – managing associations – issuers triangle profit, and the fact that investment funds participate with 60 percent GDP in euro zone is more than impressive and shows best how big the potential for market development is, Zoran Petrović says.Tanja Stanković