Following a marked reduction in interest rates, long-term fixed interest treasury bonds became Poland’s most favourable investment in 2002.
Following a marked reduction in interest rates, long-term fixed interest treasury bonds became Poland’s most favourable investment in 2002.
Treasury bond portfolios managed by CU Poland earned over 20% on the annual basis. Equity fund results considerably exceeding the Warsaw Stock Exchange index WIG testify to the group’s skilful management. CU fund managers predict that 2003 will be a good year for equities, which could translate into good results from mixed funds including equities or aggressive equity funds.
CU Poland manages assets worth around 15bn zlotys (Ł2.44bn). These include some of the oldest and largest insurance investment funds on the Polish market, offered by CU Life, and small, but dynamically expanding unit trusts (called mutual funds in America) offered by CU Unit Trusts Company.
The group also has one of the most professional asset management teams in Poland. It includes six investment advisors with licences from Poland’s Securities and Exchange Commission, three of whom hold the prestigious CFA title (chartered financial analyst.)
“We achieve good investment results both in the long and medium-term horizons, while managing large funds such as the CU Life Guaranteed Fund (with assets of nearly 5bn zlotys/ Ł814m) or CU Pension Fund (over 9bn zlotys/Ł1.47bn),” said Jarosůaw Myjak, chief executive of CU Poland group. “However, we are also able to achieve spectacular results in a short time when managing small funds, for example the 2002 result of the CU Bond fund, offered by CU Unit Trusts Company.”
2002 in Poland was marked by slow economic growth and low inflation. These, together with the start of converging macroeconomic indices with European Union levels, produced marked interest rate drops.
Poland’s Monetary Policy Council, the interest-rate setting body of the central bank, reduced rates eight times, lowering the key market rate from 11.5% at the beginning of 2002 to 6.75% at the end of the year.
“This gave amazing profits from portfolios of fixed interest bonds,” said Adam Michon, vice-president of CU Life Insurance Company. “Bond portfolios managed by the CU group earned over 20% on the annual basis.”
Despite considerable fluctuations, the equity market's main exchange indices finished 2002 at similar levels to the start of the year.
The Warsaw Stock Exchange index WIG rose over 3% while the Securities Exchange in Warsaw showed itself to be more stable than foreign equity markets, whose indices lost one- third of their value on average during 2002.
It was the year of the euro on the currency market. Even though the zloty was somewhat down against the euro, it remained strong throughout the year in relation to the trade- weighted currency basket.
“From this point of view, 2002 was mainly profitable for Polish capital market players investing in the Polish market, particularly in long-term treasury fixed interest bonds,” said Adam Michon.
Full portfolio spectrum
The CU group offers a full spectrum of investment portfolios, including those offered by CU Life and CU Unit Trusts Company.
CU Life offers the following investment insurance funds:
- debt-oriented funds: Guaranteed Fund and Strategic Fund
- Balanced funds: Active Fund and International Fund
- equity-oriented funds: CU Index-Tracker Fund and Growth Fund
CU Unit Trusts Company offers three homogenous investment funds: CU Deposit Plus (a money market fund), CU Bonds and CU Polish Equities. Clients can choose among six investment strategies tailored to particular needs in terms of expected returns and risk exposure.
“Taking account of the very low inflation in 2002, approximately 1%, the CU Life debt-oriented funds (Guaranteed and Strategic) and Active Fund results must be recognised as very good,” said Adam Michon.
“The rate of return of the Growth Fund, amounting to 17.6% (with Warsaw Stock Exchange index WIG producing just 3.2%), must be described as spectacular.”
The total value of CU Life fund assets exceeded 5.7 bn zlotys (Ł928m).
Agency network
Currently, the CU Unit Trusts Company is the only one on the market distributing via a network of tied agents
“As is the case with other CU financial services, this sales channel is very effective in the field of unit trusts,” said Marek Przybylski, chief executive of CU Unit Trusts Company.
Currently around 1,200 agents are authorised to sell unit trusts – a number that is due to increase by 50% in 2003. Since sales began on 6 May 2002, agents have attracted assets valued at nearly 100m zlotys (Ł16.3m), nearly twice as much as planned.
“We anticipate that we will be able to triple assets under management in 2003,” said Marek Przybylski.
As with CU Life funds, the CU Bond fund offered by the Unit Trusts Company produced a very high rate of return of 14.45% (from 6 May to 31 December 2002). The CU Polish Equities fund result (11.15%) testifies to very good management of that asset class.
CU group fund managers expect the macroeconomic situation in Poland to improve in 2003, including a modern acceleration in economic growth with continuing absence of inflationary pressure.
Because of the structure of fixed interest bonds, they predict no chance of a repeat of 2002’s fixed income bull market. The managers plan to find additional profits by skilful investment in the equity market. Results of CU funds that include equities in 2002, particularly during the fourth quarter (a Warsaw Exchange Index rise of 12.26%), may be a good prognosis for the 2003 market.
Information:
Grazyna Goslings, Corporate Communications Director of the CU Poland Group,
Tel: + 48 22 653 98 86, Fax: + 48 22 653 96 37, e-mail: bohdan_bialorucki@cu.com.pl.
Additional information about the Commercial Union Poland Group can also be found on the website http://www.commercialunion.pl