Statistical situation and trends - AT 31 DECEMBER 2002, the assets of Spanish Investment Funds amounted to Euro 170,8 Billion, a decrease of 3,9% in year 2002.
This negative evolution was mainly due to poor performance of global equity markets during year 2002. The amount of net inflows of Spanish Investment Funds, was of Euro 1.7 Billion, and the high percentage of assets that were invested into conservative Investment Funds helped in the drop in assets.
AT 30 JUNE 2003, the assets of Spanish Investment Funds amounted Euro 185,6
Billion, an increase of 8,7% in the first semester of the year. This increase was mainly due to net inflows in Investment Funds (Euro 12,1 billion), and the positive trends in almost all equity markets across the region, especially in the Spanish Stock Exchange.
1. EQUITY FUNDS
AT 31 DECEMBER 2002, the assets amounted to Euro 39,6 Billion, compared to
Euro 49,2 Billion at the beginning of the year. This decrease was due to bearish trends of global equity markets rather than on redemptions in Equity Funds, which remained flat. The weight of Equity Funds in the managed assets decreased from 28% to 23% (including those Guaranteed) during 2002, and the weight of International Equity Funds decreased from 19% to 15% (including those Guaranteed) of the total of assets in December 2002.
FIRST SEMESTER OF 2003: Equity Funds increased in assets up to Euro 47,2 Billion, which represents an increase of 19% in six months. This increase is based on the strong net inflows, especially in Guaranteed Equity Funds, and the good performance of the Stock Exchanges all over the world. It is worth noting that net inflows in Equity Funds in this period amounted Euro 7,5 Billion.
2. BOND FUNDS
DURING 2002 the assets raised from Euro 53,2 Billion to Euro 54,8 Billion in December 2002, an increase of 3%, based on increase in net subscriptions in short term Bond Funds and good performance of Long Term Bond Funds during the year.
FIRST SEMESTER OF 2003: these Funds have increased their assets in 11%, up to Euro 60,7 Billion, due to strong net sales of Short Term Bond Funds and the positive performances of Bond Markets.
3. MONEY MARKET FUNDS
AT 31 DECEMBER 2002, the assets amounted Euro 53,3 Billion, compared with Euro 43,8 Billion at the beginning of the year, an increase of 22%. Their weight in the total of managed assets was increased from 25% to 31% during 2002 mainly due to strong net inflows.
FIRST SEMESTER OF 2003: the positive trend which began in the second half of 2001 remained strong, and net sales amounted to Euro 3,2 Billion due to higher returns and to participants demand on more conservative investments, trying to avoid the risk inherent in Equity Funds. The assets increase from Euro 53,3 Billion to Euro 57,2 Billion, that is to say an increase of 7%.
4. BALANCED FUNDS
DURING 2002 the assets decreased from Euro 31,7 Billion to Euro 23,1 Billion, a decrease of 27%.
FIRST SEMESTER OF 2003: these Funds have decreased their assets up to Euro 20,5 Billion. This decreased is mainly based on redemptions.
5. REAL STATE FUNDS
DURING 2002 the assets increased from Euro 1,5 billion to Euro 2,1 Billion, an increase of 41%.
FIRST SEMESTER OF 2003: the assets managed have increased from Euro 2,1 Billion up to Euro 2,6 Billion, with a 24% of increase, due to net inflows and good performance of real estate investments.
B.- Trends concerning international investment funds.
Two different trends can be highlighted in the previous months:
In 2002, participants have concentrated their investments in Euro currency bond products, avoiding the risk that carry on the investment in equities or any kind of assets denominated in other currencies. The trend that showed a clear preference of participants for International Funds (1997-2000), specially for those based on equities, stopped at the beginning of 2001 and did not recovered in 2002. This was a consequence of poor global equity market performance, for International Equity Funds, and the weakness of the US dollar currency during the last months, for International Bond Funds. The total assets of international oriented Funds reached Euro 36,4 Billion as of December 2002 (21% of total assets) compared with Euro 47,8 Billion at the end of 2001 (27% of total assets).
-- During the first semester of 2003, the total assets of international oriented Funds increased up to Euro 38,8 billion, due to a better performance of International Equity Funds and to strong inflows in Guaranteed Equity Funds, especially in those which underlying investments are global stock markets indexes.
The total assets managed by International Equity Funds (Euro 29,6 billion) at 30 June 2003, represented 76% of the total assets of international oriented funds, compared with the 70% of December 2002 (Euro 25,3 billion).
Among Bond Funds and Balanced Funds the international exposure amounted Euro 9,2 Billion in June 2.003.
C.- Legal and regulatory developments.
1. Regulatory news concerning investment funds
a) Proposal for Mutual Fund Law
The Parliament is actually discussing the Proposal for Law that will transpose into the Spanish Law, the two European Directives, which were launched in January 2002, whose amended the Directive 85/611/CE.
This new UCITS Law, expected to be approved before the end of the year 2003, will admit new types of Funds as, for example, Umbrella Funds; and Funds will be able to issue different types of units/shares among other new developments.
b) Law 44/2002 (23rd November 2002).
This Law made some amendments to the Mutual Funds Law, as for example, among other issues: the authorisation of the Investment Fund should be granted by the supervisor authority, CNMV (before by Finance Ministry) and the authorisation to the Fund Manager should be granted by Finance Ministry (before CNMV); the Fund merger proceedings; and the stock lending possibilities of Funds.
2. New tax regulations
a) Law 46/2002 (18th December 2002), that amends the Personal Income Tax.
It came in force in January 2003. The key issues introduced by this law, were the following:
Capital gains of mutual fund units/shares held over 1 year will be subject to a flat tax rate of 15%, instead of previous 18%.
Consequently, the withdrawal tax rate will be reduced to 15%, instead of previous 18%.
Capital gains of mutual funds units held below 1 year will be subject to the marginal tax rate of the participant/shareholder, which may be up to 45%, instead of previous 48%.
The savings invested into mutual funds may be moved among mutual funds without paying taxes. That is to say that the taxation on the redemption of units will be eliminated if the money is reinvested into other mutual funds, managed by the same or by other manager. This tax benefit is applicable both to national funds and EU domiciled funds subject to UCITS Directive registered in Spain for public sale.
D.- New products
The Proposal for Mutual Fund Law will introduce Umbrella Funds and will permit that both Investment Funds and Companies can issue different types of units/shares.
E.- Cross-border distribution.
At the end of March 2003, 232 foreign UCITS, all of them European UCITS subject to Directive 85/611/CEE, were inscribed in the register of the CNMV (Spanish Securities Exchange Commission) in order to be sold by public offers in Spain, compared with 218 foreign UCITS register as of December 2002.
The assets of international Funds distributed in Spain reached, at 31st March 2003, a total amount of Euro 6,2 Billion, that means a decrease of 5,6% in the first quarter of this year.
F.- Other comments and outlook.
Spanish Investment Funds outlook for 2003 could be considered very positive, despite the trend in the last three years, mainly due to the tax reform approved at the end of 2002 that made investment funds a more attractive investment option for investors. A positive performance of global equity markets will help to reach this projection.
As of June 2003, the projections established in January for the end of the year 2003 have been reached mainly due to strong inflows and Stock Exchanges positive returns. The assets could reach at the end of this year Euro 190 Billion, and the number of unit holders at around 7,7 Million, assuming moderated market performances and subscriptions.
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Evolution by categories
Assets and net sales in Assets Assets Assets Variation of Net Sales
Euro billion 31 Dec 01 31 Dec 02 30 June 03 Assets
2002 2003 2002 2003
Jan-Jun Jan-Jun
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Money Market funds 43.8 53.3 57.2 22% 7% 7.0 3.2
Bond funds 53,2 54,8 60,7 3% 11% 0.3 5.0
-Domestic 51,4 53,3 59,2
1,8 1,5 1,5
Balanced funds 31,7 23,1 20,5 -27% -11% -3,9 -3,6
-Demestic 19,0 13,5 12,8
-International 12,7 9,6 7,7
Equity funds 49,2 39,6 47,2 -19% 19% -1,8 7,5
-Domestic 15,9 14,2 17,6
International 33,3 25,4 29,6
Total 177,9 170,8 185,6 -4% 9% 1,6 12,1
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Courtesy: MUFAP
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