Corporate funds are becoming an attractive opportunity for investors to further enrich themselves.
In addition to savings accounts, Czechs have recently also taken a liking to investing in funds. The wealthier and more experienced see opportunities especially in qualified investor funds. Therefore, it is not surprising that the volume of assets managed in them has already exceeded the one trillion crown mark this year. Why is there so much interest in them? And what should one watch out for?
Many companies are looking for money for their further development not only in banks, but also among the general public. They often can't get by with just issuing bonds and bills of exchange anymore. They find other ways to get to the money that could help them finance new projects and other activities, thanks to which they will grow. For example, Penta embarked on this journey some time ago, followed by the construction group DEK or the developer Crestyl. Interest in joining these funds is usually high. In the case of Penta, investors have already managed to pour tens of billions of crowns into its funds within a few months.
"Large financial groups typically open themselves to outside investors when the original founders no longer see such growth potential in the relevant asset class, or find it more difficult to raise sufficient capital. Current high valuations of a number of assets, such as stocks, private equity or real estate, support the partial 'exit' strategies of the original owners,"
explained to Forbes magazine Martin Řezáč, the director of Erste Asset Management ČR, why entrepreneurs are getting into the establishment of funds.
Society and companies are getting wealthier, investing is successful
Currently, according to data from the Czech National Bank, more than 550 funds of qualified investors are operating in our country.
"The number of these funds has doubled since 2018,"
said Jaroslav Krejčí, a representative of the central bank, for LP-Life.
"This signals the relative wealth of Czech society and rebounding confidence in investing in financial markets. The structure of Czech household savings is thus gradually converging to the values typical in Western European countries,"
claims in its report The Czech National Bank.
Trust, but verify
According to a survey, which was conducted this year for the Association for the Capital Market by the agency Perfect Crowd, it emerges that 41 percent of Czechs consider themselves investors. This represents an annual increase of 2 percent. More than 40 percent of them, however, have also experienced negative experiences with fraud during investing.
"We can see two contrary trends: while part of the population is still fighting with distrust in their own capabilities and the fear of becoming victims of fraud, the investment confidence among active investors is increasing,"
Jaromír Sladkovský, the chairman of the Association for the Capital Market, described the situation to the editorial office.
Public concerns are often justified. After all, funds for qualified investors are definitely not for everyone. The pitfalls are mainly in the following parameters: the minimum initial investment is usually in the amount of one million crowns. For some of them, it may even be twice that. It is also assumed that investors already have investment experience. And what is also significant, it is usually a long-distance run, as termination of cooperation in the early years is exposed to the risk of higher fees.
The goal of every investor is, of course, primarily for the value of their deposit to grow over time. When they then decide to exit the fund, they sell their share. They thus get back not only the original entry amount but also any possible appreciation of their investment. The assumption that the investor will automatically profit from this, however, is mistaken. Although the value of many funds increases, there are also those where it is exactly the opposite.
An example of a fund that ran into trouble was the fund of the RSBC group. This happened this year in September after the holding had to admit that it was unable to repay its liabilities. The insolvency also affected the operation of its real estate fund. Investors, fearing for their funds, began to sell their shares en masse, which eventually led to the decision to suspend the repurchase of investment shares for a year.
Amendment designed to prevent panic
In order to prevent such a mass flight of shareholders in the future, a legal amendment is planned which is to be in effect throughout the entire European Union. In the event of a crisis, the amendment protects both funds and their investors. It introduces tools that will make it difficult to withdraw money in the event of panic, ensuring that the fund can continue to operate.
Domestic economy is on the rise. Society and companies are getting richer and considering what to invest their resources in further. Therefore, the role of our central bank as an entity that supervises the investment market is also likely to strengthen even more.
"The Czech National Bank will continuously monitor future developments and risks undertaken, and will adequately respond to these risks in case of threat to the stability of the financial system,"
assure the public in their report our bankers.
Sources: author's article, own questioning, CNB, Association for the Capital Market
