The new entity, BCR Obligatiuni, will have 3.1 billion lei (almost EUR700 million) in assets and 100,000 investors, Dragos Neacsu, chairman of the fund’s manager, Erste Asset Management, and the man who oversaw the merger, told ZF.
The changes made by the European Commission were mandatory for all Romanian money market fund managers to implement and they have until June 30 to comply. The rallying to the new standards required by the Commission will have money-market funds invest in instruments with a much shorter life span and a high rating so as to keep the risk to which the investor is exposed low.
“The initial decision was for BCR to remain a money-market fund and adjust our investment portfolio so as to comply with the new standards. Yet the high costs of the portfolio rebalancing to meet the new criteria, and the current volatility of the financial sector made us think this was not the best decision for our investors,” Dragos Neacsu said.
BCR Monetar is currently the largest mutual fund in Romania with 62,300 investors and assets of RON1.67 billion. There are also seven other money market funds with cumulated assets of RON2.5 billion. To remain money market funds after June 30, they are no longer allowed to invest in bonds maturing in more than two years, while some of them currently hold bonds maturing in up to ten years.
Neacsu says that analysis of the funds in the portfolio, the investor structure, their behavior, the investment duration and the investment structure revealed that BCR Monetar and BCR Obligatiuni overlapped 80% and therefore a decision was made to merge the two funds.
BCR Monetar will be absorbed into BCR Obligatiuni, the third largest fund in Romania with RON1.5 billion in assets and more than 40,000 investors. The new BCR Obligatiuni (BCR bonds) will total RON3.1 billion in assets and more than 100,000 clients after the merger.
“We didn’t have much time to make a decision. After we made it, we moved swiftly and got approval from the boards in 48 hours,” he added.
The manager did not give up on managing a money market fund and submitted the necessary papers for a new such fund that will comply with the European standards to the capital market regulator.
The other money market fund managers on the market decided to comply by removing the “money market” term from the name of the fund, which means they are no longer subject to the new standards. To be included in a risk and investment category the managers of such funds have to secure approval from the capital market regulator and change their documents accordingly.
(English version by Loredana Fratila-Cristescu)