Shifting investments strategy from equity funds to money market funds - the case of Romanian open end fund market during the financial crisis

• Author: Radu, I. - Sava, C. C.
• Position: PhD. Student in Finance, Babes Bolyai University of Cluj Napoca - PhD. Student in Economics, Lucian Blaga University of Sibiu
• Pages: 155-162

Bulletin of the Transilvania University of Braşov • Vol. 5 (54) •No. 1 - 2012

Series V: Economic Sciences

SHIFTING INVESTMENTS STRATEGY

FROM EQUITY FUNDS TO

MONEY MARKET FUNDS – THE CASE OF

ROMANIAN OPEN - END FUND MARKET

DURING THE FINANCIAL CRISIS

I. RADU1 C. C. SAVA2

Abstract: Mutual funds are one of the key suppliers of liquidity in

Romanian capital market. This paper uses quarterly data on Romanian open-

end funds starting with 2006 until 2010. We find that significant negative

flows (outflows) were registered beginning with the end of 2007 (equity

funds), during 2008 (equity funds, balanced funds, other funds and bond

funds in the last 2 quarters of the year) and from 2009 to 2010 (in the case of

money market funds). There is evidence that the changing market conditions

attract differently the incoming flows in these mutual funds. This is the

reason why such perturbations affect investors’ confidence for these

investment vehicles and impose the reorientation of the investment funds and

of their investors to other alternatives in order to preserve their capital.

Key words: mutual funds, equity funds, money market funds, fund flow

mutation.

1 PhD. Student in Finance, Babes Bolyai University of Cluj Napoca.

2 PhD. Student in Economics, Lucian Blaga University of Sibiu.

1. Introduction

This paper explores the annual pattern of

open-end fund flows in Romania during

2006-2010 and examines the sheer

volatility of flows as investors may enter

and exit funds at any time.

We focus our study on a data set from

the Romanian National Securities

Commission (abr. CNVMR), that maintain

investors’ quarterly purchase and sale of

country funds.

This study provides two contributions.

First, it provides an overview of the

recent total fund flow patterns in Romania,

which might be a source of growth for

mutual fund industry. Second, it provides

an analysis of investors flows into mutual

funds in Romania. Thus far, little is known

about the behavior of investors’ flows into

Romanian mutual funds.

The paper is organized as it follows. Part

2 presents the global trend observed in the

last 5 years, review that identifies the

pattern of a general strategy applied all

over the world. Next sections relate the

Romanian market evidence on the transfers

of investments between equity funds and

money market funds, and the following

section 6 concludes.