12 Oct FSA should support the diversification of investment funds
Monitor magazine has published the interview of the general director of the management company Credins Invest, Estela Koçi. Asked about the situation of the impact of the global pandemic on the economy, she said that the sudden crisis of COVID-19 brought a moment of uncertainty to investors and increased demand to attract savings invested in funds. However, according to her, the market quickly passed this moment and the decline in assets in this period has been limited. She says that, in the future, it will be important for the funds to offer more diversified and sophisticated investment alternatives.
1. How has the investment fund market been affected by the Covid-19 pandemic crisis?
Today, not only Albania but the whole world is facing an unusual situation. This pandemic has been and remains an extraordinary challenge, and for all of us it has been difficult, especially in the beginning. I can proudly say that Credins Invest has managed successfully this crisis, putting health in the first place, but at the same time taking maximum care of our mission, the professional management of the funds that our clients have trusted us. In general, I think that the investment fund market has maintained stability during this crisis in terms of the level of assets under management, as well as the required level of liquidity of funds, their essential quality. Based on the latest data published by the Financial Supervision Authority for the 6-month period closed on 30.06.2020, it is noticed that the market has had a decrease in the net assets value by approximately 2% compared to the end of the year, compared to a 5% increase in the first 6 months of last year. The market has been affected by the crisis, but I think this impact in extreme conditions is not significant. Funds by nature are liquid and volatile, even under normal conditions. But it is understood that the great uncertainty that has accompanied every individual, especially at the beginning of the pandemic, has had its effects which are also reflected in the investments. What we have noticed is that there was uncertainty among investors at the beginning of the pandemic, and some of them decided to withdraw the savings invested in funds. I think it was an impulsive behavior at the beginning of the crisis. Our strongest weapon has been constant information and communication with investors. Our constant advice to investors of the Credins Premium Fund “stay invested and do not be affected by short-term fluctuations”, had more value in these difficult times. However, it is known that it is much easier to adhere to this rule in normal and calm times than in times of crisis and uncertainty. As a result, there were investors who withdrew their savings from the investment fund. On the other hand, individuals were skeptical about new investments of their savings, trying to not invest their money. All these factors have influenced the fund and the market in general, by affecting the growth comparing to the previous years.
2. What was the performance of the net assets value of the funds, from March onwards? Have you had a decrease in the purchase of quotas and / or an increase in their sale by members?
Because of the financial education not only in the previous years but also during 2020, many investors are familiar with the fact that the duration of the investment is more important than the moment of investment, to ensure sustainable profits in the long run. However, some of them find it difficult to stay invested when the fear of uncertainty is generally compounded by the fluctuation of the fund’s performance, as a result of fluctuations in the rates of bonds and bonds issued by the government. The situation created by the spread of the Covid-19 virus impacted the economy in the country, increasing the demand and debt costs for the Albanian Government in the first months of the year. As a result of this, there has been an increase in the volatility of government bond rates during these months. This is another factor that has affected the uncertainty of investors.
Unlike voluntary pension funds, which are long-term investments, the Credins Premium fund as a short-term and medium-term investment is more liquid, and within 7 days clients can withdraw their money. The main challenge during the first months of the pandemic has been the maintenance and improvement of the cooperation with existing clients, as well as the most effective management of the asset portfolio while maintaining the liquidity of the fund at all times. We say with conviction that despite the extraordinary situation, we have managed to keep the portfolio at stable levels, offering continuous orientation to members who have remained loyal to us and showed patience by continuing their investment. These members today express great satisfaction that they have not withdrawn the fund during the pandemic, and are more motivated to continue and increase their investment in the fund.
3. How has the situation affected the average return on investment in your funds?
The assets of the fund are invested in securities issued by the Government of the Republic of Albania. For this reason, the performance of the Fund’s rate of return and the quota price is affected by the volatility of interest rates in Albanian Government securities. In the first months of the pandemic, interest rates in the bond markets showed an upward trend, leading to a decrease in the quota price. These fluctuations have resulted in a decrease in the rate of return for the investor, compared to the historical return of the Fund. During the following months we have had an increase in the net rate of return, as a result of the reduction of interest rates on Government securities, which came as a result of measures taken by the Bank of Albania, reduction of the key interest rate, liquidity injection as well as Eurobond issuance. Because of the investment strategies and policies, the Credins Premium Fund has managed to perform satisfactorily and remain an attractive investment alternative.
4. Have you undertaken significant changes in investment policies since the outbreak of the crisis?
The investment policy of the Credins Premium Fund is presented in the prospectus of the fund, approved by the Financial Supervisory Authority. Investment policy changes do not generally occur, and if they do, they must obtain the consent of the investor and the supervisory authority. The crisis is not a fundamental factor in changing the investment policy. Covid-19 epidemic was not predicted, but it was an alert and constantly prepared us for periods of volatility. Credins Invest’s team has done undertaking tactical strategies to respond in a timely manner to changes in the securities market where the fund is invested, within the framework of the approved investment policy.
It is very important to provide the investor full transparency regarding the performance of the fund and the compliance of the strategy followed with the prospectus and the rules of the fund. Each investor has the opportunity to access the account online, which in terms of social distancing has been necessary. The company has continued to update the website with the necessary information, as it has regularly published funds performance reports.
5. How will this crisis affect the development prospects of the investment fund market in Albania? Can you suggest interventions at the legal and regulatory level that would make the funds a more attractive investment alternative for the Albanian public?
The pandemic situation that still continues to have multidimensional impact and consequences, increases uncertainty about the future and makes almost any kind of prediction and planning impossible. But one thing is for sure, such crises teach humanity that they must definitely think about difficult moments, must save and plan to set aside funds and savings. Investment funds in my perspective, continue to be the future of the financial market. These are products that will be further developed to respond to the growing demands of the public for more flexibility and profitability. In terms of legal framework, a very important step for this market was the adoption of the new law, as well as the expected developments of the capital market. We as a fund management company are looking forward to being able to offer the public more diversified funds, with more sophisticated instruments than government debt securities, and that meet the growing demands of Albanian investors. The role of the Financial Supervisory Authority in the following, to support and incentivize new initiatives in the investment fund market and the capital market is essential.
To read the full interview in Monitor magazine you can click on this link: https://www.monitor.al/amf-duhet-te-mbeshtese-diversifikimin-e-investîmê-te-fondeve/