Mutual fund manager Certinvest has decided to triple the short-term repurchase fees for its Intercapital equity fund, which was the target of speculators in the first quarter, Ziarul Financiar reported.
More than half of the 13.6 million RON (3.67 million euros) decline of the fund's assets was caused by those leaving the fund.
As a precaution, KD Investments, another manager on the market, decided to raise repurchasing fees from 1.5% to 3.5% for the first sixty days for all its three mutual funds.
"We filed the necessary papers with the National Securities Commission (CNVM) to raise the repurchasing fees for the Intercapital fund to 10% for exits performed within the first 15 days," Eugen Voicu, the chairman of asset manager Certinvest tells ZF.
Until the new fees are approved by CNVM, Certinvest will continue to charge 3% repurchase fee for Intercapital, for less than 90 days. Repurchase fees on the mutual funds market are reversely proportionate to the time the units in the fund are held by investors. The longer the time spent with a fund, the lower the fees, which reach zero for repurchases made after one year.
Intercapital equity fund reported net withdrawals worth 6.8 million RON (1.84 million euros) in the first three months of the year. Intercapital posted a 12% annual yield last year, while at the end of the first quarter it posted a negative yield of 16.8%. The equity fund managed by Certinvest now holds more than 19 million RON in assets, and has a total of 2,300 investors.
The volume of inflows and outflows that Intercapital reported in February confirms the speculative behaviour on the part of investors. As a result, investor subscription with Intercapital stood at 3.48 million RON in February, while repurchases amounted to 3.46 million RON during the same interval.
"Investors do not have the reflexes of a mature market, and exit mutual funds at the worst possible times. By charging high fees, we do not intend to keep investors captive in our fund for a long time. However, I don't think there is any other way to prevent speculations," Voicu continued.
Speculative investor fluctuations are also encouraged by the fact that the updated fund unit value is calculated based on prices on the stock exchange valid two or three days before. Therefore, when the Stock Exchange plunges in a single session, speculative investors can withdraw knowing that the decline will show in the fund units two or three days later.
The exit of a large number of investors from a mutual fund that invests in shares, in times of share decline of the market, affects all the investors of the fund, as the managers are forced to sell stakes at a bad time to meet repurchasing demands. The closing of these positions at times when the shares on the Stock Exchange are at very low levels affects the yields of investors that stay with the fund for a long time.
A similar situation happened last year, when equity fund Premio, managed by Pioneer Asset Management, posted a drastic decline in yields due to the withdrawal of speculative investors in the first half of 2007.