Mutual funds look overseas in the hunt for high returns

In the midst of financial crisis, Romanian collective investment schemes (most commonly known as mutual funds) are tapping new opportunities arising in emerging markets. Although the portion of investments in foreign equity is still narrow, companies start diversifying their range of products, launch new debt instrument and chase emerging markets for higher returns. Fund managers interviewed by Wall-Street outlined their future strategies and how they plan to hunt for our neighbors’ profit-making opportunities.

Raiffeisen Asset Management prefers emerging markets

Mutual fund manager of Austrian-based Raiffeisen focuses on investments in overseas markets, especially emerging markets that still offer high returns.

Raiffeisen Prosper is an equity fund with 30% of its pooled money invested over the long term in foreign stocks and 50% in the local market.

Raiffeisen Benefit fund, diversified fund directs its asset on 12.5% stocks on long term in foreign markets and 27.5% on the local market.

RAM’s money-market fund, Raiffeisen Monetar, invests only in leu-denominated fixed-income securities as part of its overseas investment strategy, Ion explained.

“We didn’t have any major changes regarding the asset allocation for foreign markets, as BSE had a good performance so far. We have made some minor changes on the overseas investment structure, by modifying the allocations on various geographical areas”, Mihail Ion (photo) manager of Raiffeisen Asset Management told Wall-Street.

The access to foreign equities is enabled by the purchase of fund units at the equity and diversified funds. Thus, the company mitigates the risks by diversification and hence it offers higher yields.

Mihail Ion also said that he preferred the emerging markets as they move at higher growth pace than mature markets, but offers a similar return and risk profile to Romania.

“Moreover, in the current financial crisis, these markets are better positioned: banks didn’t suffer any loss from the subprime crisis, the internal demand offsets a portion of the declining demand from the global markets, the state measures to fight crisis were efficient, and some of them are connected to commodity prices, which are expected to go up in the coming period”, he said.

The best return obtained by an investment of RAM in foreign equities this year stood at 55%.

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