In the past period, the Association placed particular emphasis - due to the quickly developing and changing market environment - on the development of uniform professional standards. In this area, the uniform proposals on matters fundamentally determining the operation of the operation of investment funds were approved. The members utilize the proposals and the supervisory organizations incorporate these in their every day practices.
The proposals effect the following areas:
- utilizing derivative products
at the time the Act on Investment Funds was being developed, these markets were not operating in Hungary thus, when they appeared the secure adaptation thereof became necessary (the funds may use these products for hedging purposes).
- standardizing the calculation of the net asset value
This is an extremely important issue in Hungary, being that in the case of certain securities the inadequately liquid markets' price indexes may divert the investment fund's net asset value from the true value. Being that the management regulations are built on jointly established principles, it has become possible to compare the performance of the various funds.
- the proposal made on the uniform yield calculation, which contains the yield publishing related advertising ethics and investor protection aspects. The purpose of all of the above, is to ensure that the competition on the market is regulated and takes place within a uniform framework and that the investors obtain reliable information on the operation of the investment funds. This can ensure that the investment funds preserve their positive investor rating.
Another important goal in the course of developing the pension scheme is to ensure an increasingly larger role for the investment funds and to achieve, that in the course of modifying the law on the operation of the investment funds, the competitive disadvantage of investment units in Hungary ceases.
The Association just reached the point in its development, where besides the voluntary work of the company representatives, further development requires the hiring of permanent employees primarily in the interest of adequate internal and external information/data exchange.
Consequences for the investment fund industry
In 2001 the investment fund market grew by 24% in HUF terms. The growth was driven by the declining inflation and interest rates that made the bond and money market funds attractive. The poor performance of the equity markets also shifted the interest of investors towards bond and money market investments. As a consequence of the appreciation of Forint against Euro and US$ the demand for international diversification has been decreased. The exposure of the domestic funds to securities denominated in foreign currencies is 5 pc.
Assets by fund categories (as of Dec 31, 2001)
Hungarian securities fund market in figures
Legal situation
Two major changes have been taken in 2001:
- The Foreign Exchange Law was amended radically. Therefore all the limits of cross-border investments have been practically abolished.
- New Law on Capital Markets has been approved by the Parliament. This also includes the regulation of the funds introducing the fund of funds concept, the index-tracking funds. The new rule opens up to derivative transactions and widen the activity of fund managers by allowing portfolio management services.
Cross-border activities
After introducing of the new regulation in 2001 the cross-border fund activity does not require any permission from the foreign currency authority (National Bank of Hungary). Hungarian investors are allowed to invest practically without any limitation in any instruments. However all the securities can only be offered by licensed brokers or banks to the public in Hungary. In case of a retail distribution permission is required from the capital market (Unified Financial Supervisory Board) authority. Since the process is not detailed regulated for foreign applicant, any approval has been issued yet.
