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06May2004
Bulgaria First Equity Mutual Fund To Launch IPO
Bulgarian equity mutual fund Advance Invest will launch on Monday an initial public offering on the local stock exchange, becoming the first mutual fund investing in riskier instruments in the country of eight million people.
"Advance Invest will invest mainly in shares of liquid Bulgarian and southeast European companies with high growth potential," Daniel Ganev, chief portfolio manager of Karoll Capital Management, told SeeNews.
Karoll Capital Management, the asset management arm of local investment intermediary Karoll, will manage the assets of the newly-established fund.
"We will aim to provide a high yield for our clients, ensuring maximum security through a diversified stock portfolio," said Ganev.
He added that Advance Invest would invest in the stocks of stable companies, whose market share and earnings are expected to grow in the future.
At present three mutual funds, Zlaten Lev, Elana Eurofund, TBI Eurobond, operate on the nascent Bulgarian financial market.
Elana Eurofund and TBI Eurobond invest in bonds and Zlaten Lev, a heir of a former privatisation fund, invests mainly in bonds and has a small equity portfolio.
In March, the country's financial watchdog licensed local Capman Capital to operate as a mutual fund but the fund has not begun operations yet.
Mutual funds give, by definition, small investors access to a diversified portfolio of equities, bonds, and other securities. Each shareholder participates in the gain or loss of the fund, which gives non-professional investors a better chance to participate in stock exchange trading.
Advance Invest, which was licensed to operate as an open-end fund in January, has the highest capital among local mutual funds. It stands at 2.05 million Bulgarian levs ($1.28 million/1.05 million euro) distributed in ordinary shares with a face value of 1.0 lev per share.
"The fund will focus 65 percent of its investments in Bulgarian stocks and the remainder in shares of east European companies, bonds, T-bills and bank deposits," Ganev said.
"In Bulgaria, we will invest mainly on the 13 most liquid stocks comprising the blue chip SOFIX index on the Bulgarian Stock Exchange – Sofia, as well as in other liquid stocks with high market capitalisation," he added.
Advance Investhttp://www.advanceinvest.bg/ will initially invest in shares of Romanian, Greek and Turkish companies but hopes to be able to include U.S. stocks in its portfolio at a later stage.
In a bid to weather the risk, Advance Invest will pour funds in government bonds, mortgage bonds of local banks with high credit ratings, and in corporate bonds issued by leading firms in Bulgaria.
"We eye both high-end individual clients and institutional investors," Ganev said.
The fund will choose companies operating mainly in the tourist, telecommunications, energy and IT sectors as well as in the chemical, pharmaceutical, food and machine-building industries.
"Mutual funds are still not very popular in Bulgaria but they are set to grow in the future with three new equity funds expected to enter the financial market by end-2004," Ganev said.
The more active participation of pension and investment funds in the stock exchange and the upcoming wave of state sell-offs on the bourse is expected to liven up the sluggish stock market, Ganev said.
The local stock exchange suffers low liquidity with an average daily turnover of 3.2 million levs last year.
Trading volume on the BSE, which lists shares of about 310 companies, stood at 688.4 million shares for last year, up 121 percent from 2002. Even the firms included in the SOFIX index are not traded every day.
(1 euro=1.95583 levs)
