Investment funds’ growth slows down

Tirana Times
By Tirana Times November 13, 2015 10:31

TIRANA, Nov. 10 - While traditional bank deposits struggle to remain at positive growth rates due to a sharp cut in interest rates, the emerging investment funds continue registering moderate growth rates fuelled by more favourable interest rates although at slower pace compared the boom following their establishment in 2012.

A report published by the Financial Supervisory Authority, shows net assets in the two investment funds, controlled by Raiffeisen Bank, the country’s biggest commercial bank, rose by an annual 6 percent to 67.6 billion lek (Euro 479 mln) in the first three quarters of this year.

“The market is dominated by investments in government securities which represent around 71.23 percent of the funds’ assets, a drop by 0.98 percent compared to the end of 2014,” says the Supervisory Authority in a report.

Some 33,128 people are reported to have invested in these funds by the end of Sept. 2015, up from 32,669 at the end of 2014 and 28,422 in 2013.

While investments in the funds have increased by 3.9 billion lek (Euro 27.8 mln) in the first three quarters of this year compared to Dec. 2014, bank deposits during the same period have contracted by 4.3 billion lek (Euro 30.6 mln) hinting Albanian households are withdrawing deposits to invest in the more profitable investment funds.

The rapid growth of investment funds favoured by higher interest rates compared to the traditional bank deposits has forced the Albanian Financial Supervisory Authority to undertake legal initiatives targeting increased transparency toward investors and the funds’ risk administration. In its latest 2015 progress report on Albania, the European Commission praises the adoption of regulations on administering the liquidity of the investment funds and on notifying measures to prevent money laundering and financing of terrorism.

The International Monetary Fund has also warned that “while these funds have helped diversify the ownership of government securities, they are inadequately supervised and regulated, invest mostly in longer-dated securities and their clients appear to consider these funds as substitutes for bank accounts.”

Currently only two investment funds, Raiffeisen Prestigj and Raiffeisen Invest Euro operate in Albania, making it a pure monopoly market. The funds were established in early 2012 by Raiffeisen Bank Albania, the leading commercial bank operating in Albania. The timing coincided with the decision of Raiffeisen decision to scale back its participation in the public debt market to limit its exposure to the Albanian sovereign debt.

Investments funds represented the second biggest financial market at the end of 2014 with assets estimated at 4.6 percent of the GDP.

Tirana Times
By Tirana Times November 13, 2015 10:31