Hrvoje Krstulović: Croats are more inclined to seek financial advice from friends than from professionals

Investing in the capital market among Croatian citizens is becoming trendy again. For now, most are satisfied with a more conservative approach of purchasing government bonds and treasury bills, but the trading volume and primarily the rise of the Zagreb Stock Exchange index to its highest level since 2008 suggest that some citizens have been encouraged to take riskier investments. It should not be overlooked that a large portion of clients of domestic brokerage houses trade on European and American exchanges.

The renewed interest in investing in the capital market has not bypassed investment funds either. According to data from the Croatian Financial Services Supervisory Agency, the net assets of open investment funds (those intended for small investors) reached 2.8 billion euros at the end of June, which is a noticeable 20.5 percent increase compared to the end of last year. What is the perspective of this type of domestic financial industry and can it return to the levels of the record year 2007? Hrvoje Krstulović, president of the Association of Investment and Pension Funds of the Croatian Chamber of Commerce, speaks for Lider. Krstulović has been in the financial industry for almost a quarter of a century, and from 2006 to 2010 he was on the Management Board of Erste Securities. He became a member of the Management Board of ZB Invest in 2011, and a year later he was also appointed president of the Management Board of that company.

At the peak of the domestic capital market in 2007, the assets in open investment funds amounted to, converted, four billion euros. Do you expect such a level of assets to return?

– Yes, I think it can. This year it will not happen, but in the following years it is certainly possible. This is related to the growth of wealth and the awareness of investors about the need for active savings. In that case, we will talk about a quality and thoughtful savings decision of small investors, which will consequently result in stable assets of investment funds. On the other hand, in 2007, there was a kind of enthusiasm for the market among investors, not only in Croatia but worldwide, and positions in the capital market were entered with less thought. After the market fell, investors were disappointed and distanced themselves from it. Through financial education and awareness that long-term savings are needed, this trend is slowly turning around.

Among the most popular UCITS funds, assets reached 2.8 billion euros, and in June, they increased by 3.2 percent on a monthly basis. Do you notice a return of small investors to investment funds?

– Yes, although this trend is not as significant as the data suggests regarding the three percent monthly increase in assets. The increase is primarily due to newly established money market funds, which are indeed a very acceptable instrument for managing liquidity. This type of fund was very popular between 2009 and 2012 because it offers relatively safe investments for shorter terms, and interest rates at that time were above ten percent for short terms. The trend of small investors returning to investment funds correlates with the overall economic growth and the increase in GDP per capita, or the wealth of citizens, which is why more space is opening up for consumption, but also for savings. And that savings in various forms, from deposits in banks to life insurance to investments in the capital market, both in voluntary pension funds and in UCITS funds. Here I see the potential for raising citizens’ awareness of the need for long-term savings and utilizing positive trends in the capital market, especially in equity funds.

The assets of Croatian investment funds per capita amount to about 1400 euros. Where do you see room for increasing that investment culture?

– The latest OECD report on financial literacy reveals an interesting fact. We can be satisfied with financial knowledge in Croatia; we have more knowledge than, for example, Italians or Hungarians. We are below average in active savings and receiving advice from impartial providers. In other words, Croats are above average inclined to seek financial advice from friends or family members than from financial professionals. Regarding savings, we still prefer current consumption over long-term active savings. Even in relation to the current level of GDP per capita, there is room for greater distribution of savings.

Read the entire interview in the printed and digital edition of Lider.