The volume of assets managed by fund managers operating in Estonia continued to grow, reaching almost 7 billion euros and growing by 3% over the quarter. For the first time it was the business line of securities portfolio management that led the growth, increasing by 9% having fallen continuously for a very long time prior to the first quarter of the year.
The business line of securities portfolio management is a small share of the total and accounted for only 2% of all the assets under management.
Key indicators |
Q1 2019 | Change | Q2 2019 |
|---|---|---|---|
| Value of assets managed of which assets of funds (including non-open funds) |
6.75 billion euros 5.31 billion euros |
↑ | 6.96 billion euros 5.48 billion euros |
| Quarterly growth in the market value of funds | 10.2% | ↑ | 3.2% |
| Value of balance-sheet assets of fund managers | 139 million euros | ↓ | 132 million euros |
| Profit | 5.1 million euros | ↓ | 3.4 million euros |
| Annualised return on equity | 16% | ↓ | 13,9% |
| Equity coverage ratio | 505% | ↓ | 485% |
The business line of fund management grew by 3.2%, and the investment of fund assets increased by 1.9%. The total volume of funds managed increased by 12.3% in the first half of 2019, or 760 million euros.
The volume of assets on the balance sheets of fund managers fell by 5% from the first quarter to 132 million euros in the second quarter, because of income tax liabilities that arose from undistributed profits from previous periods being paid out as dividends. The undistributed profit of the whole sector fell by 11.2 million euros, which was some 600,000 euros more than in the same quarter of the previous year.
The net profit of the sector was 3.3 million euros in the second quarter of 2019, and 8.4 million euros for the whole of the first half of the year, up from 6.7 million euros in the first half of 2018.
The return on equity over the year in the second quarter of 2019 was 13.9%, which was two percentage points lower than at the end of the first quarter. Profitability remains good.
The equity coverage requirement of the sector was met by 485% at the end of the second quarter, and all market participants met the minimum requirement for equity. The coverage of the requirement fell by 20 percentage points in the second quarter to its lowest level since the end of 2016. The equity of the sector was reduced by the undistributed profit from earlier periods being paid out.
Main development trends and risks
- The fund management sector is profitable and the return on equity is good.
- The sector remains well capitalised, though its equity coverage ratio has fallen a little. Despite this, some individual fund managers still come under close attention.
- The sector is subject to strong political pressure and uncertainty about the near future, which increases the risks to managers of mandatory pension funds.