The Currency used in the Report is Polish Zloty, and the data is presented in PLN.
The exchange rate is approximately at 1 USD is equal to 3,845 PLN.
Population: 8,632,500
GDP: 69,400 million PLN
GDP growth: 1,3%
Inflation rate: 1,9%
(Annual average) Unemployment rate: 18,7%
The last 42 months has seen intensive growth in assets under management of the Polish Investment Fund industry. During the same period the assets grew 10 times, and analysts agree that there is still potential for growth.
The growth momentum triggered on the end of 2000 is still visible. The rate of growth in 2002 was 62.3%. The pace of the growth in 2003 was even astounding to approximately 100%.
The total NAV was 22.8 billions PLN at 31 December 2003 and 33.5 billions at 31 July 2003. The growth spurned as banks stated to distribute funds, coupled with decreasing interest rates. Performance of investment funds (especially bond funds) supported by easing of legal regulations, and transparency of funds operations made funds the best selling financial products. Bearish trend in Warsaw Stock Exchange and global equity market resulted in strong growth of the domestic bond market funds.
The majority of the assets volume was invested in bond and money market segment. During the first half of 2003 indicates a growing interest in Hybrid and Equity funds as well.
The days leading to accession to EU made Polish financial market friendlier for Investment Fund. The ten years of creating of the foundation for investment Funds sector in Poland brought the results.
Main growth drivers:
-- Low interest rates lead investors to search for alternatives to traditional bank deposits;
-- Taxes on savings made investment funds more attractive than bank deposits (deferred tax effect);
-- Development of capital market based pensions system
Main beneficiaries (Companies) of the growth:
Companies having vast banking distribution network, like Pioneer, PKO/CS, WBK/AIB; companies having well performing funds, likeING, GTFI, Skarbiec, UniKorona, CU; companies having promoted their products "anti- tax" products (Pioneer, Millennium, CAIB)
Industry, Structure and Characteristics.
In 2002, Poland celebrated the tenth anniversary of the fund management sector. On the 28th of February 1992, the Polish Securities and Exchange Commission licensed the first mutual fund company, and on the 28th of July 1992 the first mutual fund, Pioneer Balanced, was introduced. Within three years of inception, the number of companies and funds increased, and after a difficult first seven years, the assets under management topped the "magic 2 billions barrier" of PLN ( 0.5 billion Euro approximately). And the industry begun to achieve its desired result of expected growth.
The history of this "take off" is illustrated in Figure 1. The data is presented in PLN to separate the history of the exchange rate and appreciation of the Polish currency. On 31st of July 2003, assets under management were on a level of 8,684 millions of USD.
The reasons for this growth include: the decrease in interest rates that made traditional bank deposits a less attractive savings vehicle in Poland; the better investment results offered by Funds; their transparency; the quality of the service offered; and investor education. Retail banks triggered growth by opening up mass distribution channels.
In comparison, asset levels in the pension funds sector (mandatory for December 31st, 2002) was approximately31 billions PLN, approximately 8 billions USD. The transformation of the Polish market is presented on the Fig 2.
Taking into account the concentration of the market, the five largest companies controlled 73,3% of the market.
Legal developments and other activities of the association
The preparation for the Single Market must start with the Polish domestic market. Fund management companies in Poland focused on domestic issues. Evidently, the regulators and policy makers focus all their efforts on easing of transition to market based economy has resulted in the growth of the assets under management at the end of 2001. Although the pace of growth is extensive, the fund management companies in Poland are keeping themselves a step ahead of competition from rest of Europe, and developing technical co-operation with other European Asset Management Companies. This co-operation was visible during the preparation of the new Investment Fund Act and adoption of UCITS III regulations, as well as in Individual Retirement Account Regulation. The role of the Association of Fund Management Companies in Poland was appreciated by the market in developing, The Code of Conduct in Fund Performance, Standard of the Money Market Fund (included in the new Investment Fund Act) and Classification of the funds. The Polish investment funds sector was carefully regulated from the very beginning. The Investment Fund Act was based on the highest global standards. All funds were domiciled in Poland. The protection of the investor is a high priority of the Investment Fund Act. Legal regulation in Poland may be too restrictive, but it has created a foundation for a growing trust in investment funds. The supervisory role of the Securities Commission and the high entrance market barrier protected the market against possible mistakes by a young industry and prepared the industry to adopt UCITS III.
The adoption of UCITS was not a shock but rather a chance to identify additional opportunities for growth. The adoption of UCITS took a form of the new Investment Fund Act. The new Act is now being considered for acceptance by Parliament.
In August 2003 Polish Government accepted a New Act concerning Individual Retirement Accounts and Employees Retirement Plan.
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Table1. Selected indices described investment funds industry in Poland.
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Index/Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
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NAV/Stock 0,53 14,17 19,1 6,17 5,92 4,34 2,47 2,55 5,45 11,71 21,0
Exch. Cap.(%)
NAV/Bank's - - - - 1,69 1,74 1,29 1,98 3,71 5,96 11.64
deposits (%)
NAV/GDP (%) - - - 0,23 0,35 0,4 0,32 0,51 1,04 1,68 2,96%
NAV/per 0,05 21,51 36,88 18,02 35,24 49,14 46,25 81,56 183,58 313,77 590,26
capita PNL
NAV per 0,03 10,08 15,13 7,3 12,26 13,97 13,2 19,66 44,33 78,71 154
capita USD
NAV per 0,03 8,99 12,4 5,7 9,87 12,65 11,3 19,56 47,65 89,09 147
capita EURO
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