The Most Investment is in Low-Risk Funds

Investors remain cautious. Although the assets of open investment funds have increased by 1.13 billion kuna in just over a year, those with a low risk factor are growing the most.

The assets of open investment funds have increased by 1.13 billion kuna in just over a year. According to data from the Croatian Financial Services Supervisory Agency (Hanfa), the assets of UCITS funds at the end of January this year were valued at 14.07 billion kuna, compared to 12.98 billion kuna at the beginning of 2015. According to this data, four ‘old’ funds had an asset growth of over 100 million kuna during this period. The fifth fund, Smart Equity II, was established in mid-2015 and reached an asset value of 108 million kuna by the end of January 2016.

Conservatives are Record Holders

The absolute largest asset growth was recorded by the cash fund PBZ Investa. At the end of January, its assets were valued at 1.88 billion kuna, which is 413 million kuna more than at the beginning of 2015. The Erste Adriatic Bond fund’s assets increased by 327 million kuna, which is double the amount at the beginning of last year, while its cash fund’s assets grew by 114 million kuna, and the bond fund of PBZ Investa saw an increase of just over 102 million kuna during the mentioned period.

What all these funds have in common is that they are conservative funds with a low level of risk, and the Smart Equity II fund offers 100% protection of the initial value of shares.

– After the crisis of 2008 and 2009, from which many investors emerged with unpleasant losses, there has been a gradual return of appetite for the capital market, primarily influenced by global monetary policies. However, many investors, especially in the domestic market, are still not ready to take on greater investment risks in riskier assets, such as equity funds. Listening to market trends, special funds with predetermined maturities or strategies that protect part or all of the principal have recently become increasingly attractive. The main reason for the attractiveness of funds with protected principal is that such funds provide investors with the opportunity to protect part or all of their initial investment with the potential for additional earnings, explains ZB Invest.

Most Desired Characteristics

On the other hand, they emphasize that funds with predetermined maturities, such as those managed by ZB Invest, are attractive from the perspective of saving for the future, i.e., achieving a specific goal (retirement, children’s education, purchasing a yacht, a weekend house, traveling around the world).

– One of the main characteristics of Target Date or life-cycle funds is dynamic riskiness – in the early years of the fund’s existence, when investor aversion to risk is low, assets are primarily allocated to equities. As the maturity approaches, and as investor aversion to risk increases, the fund invests in financial instruments that serve to preserve the capital earned up to that point, such as money market instruments or bonds. Given that minimizing volatility and preserving asset value after the crisis have become two ‘most sought-after’ characteristics of investment products, such funds perform well in this regard, note ZB Invest.

Energy on the Horizon

The beginning of 2016 immediately showed that the year would be extremely challenging and, as fund managers always like to say – volatile. The continued decline in oil prices to the lowest levels in the last twelve years has caused significant turbulence in the capital market, further crashing the shares of the energy sector.

– It is expected that at some point, oil prices will hit bottom, after which the energy sector should stabilize and could become interesting to investors again. When it comes to Croatia, the tourism sector should still be in focus for investors, although repeating the excellent results from last year’s tourist season will be a challenging goal, conclude ZB Invest.