The next two years are now likely to be deciding for small investment funds as a make or break period. The key to success will be to increase the number of clients as well as funds managed. After that foreign companies will be entering the Polish market with huge resources behind them.
The average investment fund company in Poland will manage just over PLN120m.
However only 25 of 112 fund managers registered with the stock market exchange have assets in excess of PLN100m.
A fund company needs around PLN20m - PLN30m of assets just to cover costs. A fund probably needs around PLN100m in assets to be profitable.
The largest fund on the Polish market is PKO/CS with assets of over PLN2.3bn. It is also the second largest fund in central and eastern Europe with a Hungarian fund taking the number one slot. The next in line is the Pioneer fund which has over PLN1.8bn in assets and is managed by Pioneer Pekao. The smallest fund is the Invesco fund which specialises in foreign bonds and has barely PLN2.6m in assets.
Andrzej Szeworski, the deputy MD of the Pioneer Pekao investment fund, says that there is no reason for small fund management companies to be present in a developed market. The Polish market is still growing and therefore the presence of smaller companies may be considered normal especially as some of these firms have only been in existence for two or three years. However if nothing dramatic happens to them in the next two or three years then a decision concerning their merger or liquidation can be expected.
PKO/CS can boast profits of around PLN1m for last year but this fortunate state of affairs is only shared with three, at most, other management companies.
Andrzej Szeworski says that his fund was unable to post profits last year due to mergers with two other funds. This year he is expecting to report a significant profit. He expects around five other funds to be in the black this year and to stay that way.
Many other funds, especially the smaller ones, cannot possibly hope to be profitable. However big is not also profitable. Some funds such as Invesco, GTFI, PBK Atut and Millennium which has just been founded have assets worth nine figures PLN but are a long way from profits. Therefore what can the smaller funds hope for?
The American owners of the Invesco fund are not happy with the performance of their Polish subsidiary but are not yet planning to pull out of this market. They employ only five people. They plan to wait. It is also uncertain what will become of the PDM investment fund which belongs to Fortis Securities Polska. In February the last of the four funds that it once managed was liquidated. Piotr Fugiel of the management of the PDM fund house says that he does not know what will happen next, if a new fund will be created or not. A decision will be made at the end of May.