By the end of October 2022, the NAV of Croatian mutual funds decreased by 24.1% YoY, 23.4% YTD, and 0.1% MoM, amounting to HRK 16.47bn. Compared to its pre-COVID-19 maximum, it decreased by 28.6%.
Recently, the Croatian Agency for the Supervision of Financial institutions, i.e. HANFA, published the monthly report on the development of the Croatian financial markets, for the month of October 2022. According to the report, the NAV of Croatian mutual funds amounted to HRK 16.47bn, continuing the decline for the 2nd month in a row, albeit at a much slower rate. This would mean that it declined by only 0.1% MoM, but on a YoY and YTD basis, it declined by 24.1% and 23.4%, respectively.
With the importance of Croatian mutual funds in the Croatian financial market, seeing what changes they record can give us an indication of the overall market health. At the same time, it can show us how the current macroeconomic and geopolitical developments are affecting the funds, giving us even more valuable insights. In fact, here we can see that the NAV of the Croatian mutual funds is far from the levels it achieved in the pre-COVID-19 times, with it being 28.6% lower than those levels in October.
Looking at the changes recorded in the asset structure of these funds, on a monthly basis, the largest absolute decrease was recorded by deposit and cash holdings, which declined by 16.5% or HRK 558.5m. Following them, we have receivables, which declined by HRK 96.9m, or 61.6%. Finally, we have bond holdings, which decreased by 0.3% or HRK 28.3m. On the other hand, the money market recorded the largest increase, growing by 42.6% or HRK 266.4m. Next up, we have shares, which increased by 4.3%, or HRK 78m, and investment funds, which grew by 2.3%, or HRK 32.9m.
Meanwhile, on a YTD basis, the largest decrease was recorded by bond holdings, which decreased by 22.5%, or HRK 2.77bn, and deposits and cash, which decreased by 41.6%, or HRK 2bn. Shareholdings also recorded a noteworthy decrease, declining by 26% or HRK 672.9m. On the flip side, the only asset class to record an increase was the money market holdings, which increased by 84% or HRK 407m.
What this data can tell us are several things; Firstly, on a YTD basis, most of the asset classes recorded a decline, both due to the decline in value of the asset classes, to a certain extent, due to redemption of shares in funds that invest in these asset classes. Meanwhile, the MoM data can show us a certain slowdown of the trend; fewer investments are held in the safest types of holdings, i.e. deposits and cash, and more investments are made into money market holdings, shares, and investment funds, which do carry higher risk but also higher returns. This could be seen as a sign of stabilization, but due to the uncertainty we are currently facing, both macroeconomic and geopolitical, it’s too early to say for sure.
Total assets of all Croatian mutual funds (2015 – October 2022, EURm)
Source: HANFA, InterCapital Research
However, there is one other thing that influences the NAV of the funds besides the change in the value of the holdings, and that is the net contributions to the funds. If we looked at those, we could see that during the month, the net contributions were negative at HRK 134.9m, meaning that there were more redemptions from the funds than there were new contributions into the funds.
Turning our attention to securities and deposits, they amounted to HRK 14.87bn in October 2022, representing an increase of 2.97% (or HRK 429.3m) MoM, but a decrease of 19.9% YTD (or HRK 3.69bn), and 19.8% YoY (or HRK 3.67bn). Of this, domestic securities and deposits accounted for 53.75% of the total (or HRK 7.99bn), decreasing by 2.88% MoM, 27.6% YTD, and 26.8% YoY. Foreign securities and deposits accounted for the remaining 46.25% (or HRK 6.88bn), increasing by 10.7% MoM, but decreasing by 8.5% YTD, and 9.8% YoY.
In terms of the current asset structure of the Croatian mutual funds, bonds still hold the vast majority at 57.2%, representing an increase of 0.9 p.p. MoM, and 1 p.p. YTD, followed by deposits and cash at 17%, recording a decrease of 3 p.p. MoM, and 5.2 p.p. YTD. Next up, we have shares, which accounted for 11.4% of the total, which is an increase of 0.7 p.p. MoM but a decrease of 0.3 p.p. YTD, and investment funds, which accounted for 8.6% of the total, representing an increase of 0.3 p.p. MoM, and 1.2 p.p. YTD.
Croatian mutual funds AUM structure (October 2022, %)
Source: HANFA, InterCapital Research