Waiting for better days – Portugal’s AM industry looks to rebound
Jose Veiga Sarmento, president of APFIPP, the Portuguese fund management and pension funds association, talks about prospects for Portugal’s asset management industry, which experienced a collapse after the financial crisis.
The industry in Portugal grew steadily from the early 1990s, peaking in 2006 with almost €30bn invested in mutual funds. Then came the financial crisis. Investment collapsed and now stands at about €13.4bn.
How is the local industry developing?
Investment funds are practically half what they were. The industry is smaller but it is different.
At the time [in 2006] more than half the volume was in treasury funds and short maturity bond funds. Most of the outflow was from that type of investment which now represents 18% [of the total]. Money moved from funds to bank deposits.
In contrast, equity funds did not decline as a proportion of investment. We have seen an increase in non-Ucits funds, Fundos Especiais de Investimento (special investment funds) which were 4% of the market in 2006 and now account for more than a quarter of the market.
Treasury funds and short maturity funds declined significantly, equity funds resisted to the outflow and investors went to new types of funds outside the Ucits umbrella, to Portuguese regulated but not harmonised funds.
Is there strong interest in equity?
No, but the fact that equity funds did not decrease is important. What declined significantly were the conservative investment funds and cash funds with the money going to deposits.
Bank deposits rose from €146bn in 2006 to €215bn at the end of 2010 and are more than €215bn now.
There has been a huge increase in bank deposits. There are various reasons for this. Banks need funding and people are open to conservative types of placements, for safety. Deposits have those characteristics.
What interest rates are banks offering for deposits?
Nowadays, you can place your money in a bank from 2% to 5%. Deposits are guaranteed up to €100,000.
What do you do to support the industry?
One thing we’ve done recently is to publish a weekly Top Ten table of the best funds in the year.
This shows people that investment funds can provide a bigger return than bank deposits. It’s a practical way to encourage people to return to investment funds.
We’re coming out of a period of low savings so we try to alert the public about the need to save.
The newspapers are full of news about stock markets, but there was nothing about savings. So with the Catholic University, we created a monthly indicator of family savings. The press takes a great interest in this and people wait for the latest numbers to evaluate the trend for their savings.