There is plenty of room for mutual funds

Definitely there is a need for a proper understanding of what capital markets stand for at the economic/political decision making level, which should create the background for a larger local investment universe.


MIHAIL CATALIN ION

MIHAIL CATALIN ION

former PRESIDENT at SAI. RAIFFEISEN ASSET MANAGEMENT SA

Q1. What would asset managers need most as incentives from a new economic thinking to become more successful in Romania?


Definitely there is a need for a proper understanding of what capital markets stand for at the economic/political decision making level, which should create the background for a larger local investment universe. This may allow long term funds from the emerging mutual and pension fund business to be invested locally, but not abroad. Having a strong need for foreign capital in order to catch up with the developed economies, Romania cannot afford to let the migration abroad of the only long - term money flows accumulated locally. Another layer of economic thinking is at the banking sector level. Facing higher capital needs in the future as the provisions of the Basel III agreement will be enforced in few years, the banks around the world, including in Romania, should and will be interested to develop the fund business as a steady revenue generator which will require light capital needs.


Q2. What’s the biggest advantage for an asset manager attempting to do business in Romania? What about the biggest deterrent?



The biggest advantage is the fact that the market is not penetrated yet by the mutual funds, therefore the growth potential of the industry is high. A ratio dividing funds by deposits+funds from private individuals in Romania accounts for about 8%, while in Western Europe may go up to 25%.  This can be viewed also as a deterrent, as a part of the public is not familiar yet with the products, hence there is a need to grow the economic, financial and saving culture here. Nevertheless, in our case, the customers of Raiffeisen already have a penetration of 25% of the funds in their financial wealth (deposits and funds, for comparability and simplicity), the highest in Romania and greater than the European standards, while for the high net worth customers of Raiffeisen this ratio overpasses 50%, the investments done in funds are already greater than in deposits.



Q3. What do you make of the establishment of a sole financial supervision authority that shall monitor the insurance, capital market and pension funds altogether? Is it going to help your business, and, most importantly, is it going to help the society and economy?



In principle, such a common authority should have positive impact on the market players and the economy. For Raiffeisen Asset Management, a company operating both in capital market (mutual funds) and pensions (voluntary pension funds), a common regulatory and supervision standard should have definitely a positive impact. Moreover, we believe that it would be beneficial for such a common authority to be managed and filled with valuable technical people having a very good understanding of the markets they supervise, in order to foster the market development. This can be achieved by improving the regulatory framework and by reducing the cost of doing business in these fields of activity. We understand through this a stronger attention to the content rather to the formal aspects of the activity and lower taxes collected from the market players (funds).  These days the taxes collected by the Securities Commission and Pension Commission account for about 10% of the revenues of the asset and pension managers, a level which should be lowered as the size of the business already went up.

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