Question

Assess the trends and issues in the global and Mauritian fund management industry.

Answer 1

The share of contractual savings institutions in the housing finance market (35.9% in 2013), which is mainly driven by Insurance Companies, is almost similar to that of commercial banks (37.5% in 2013) and even higher than the share of the Mauritius Housing Corporation (26.6% in 2013). On the basis of the trends indicated in Table 24, it seems that commercial banks will continue to drive the housing finance market in the years ahead until the market for mortgage bonds and mortgage securitisation evolves fully.

Capital Market Operations

Stock Market Outlook

Over the last year, the global equity markets have experienced a general upturn – driven by higher-than-expected earnings growth and positive economic data. Markets recovered strongly from the impact of the war in Iraq and the SARS virus. Asian markets, in particular, have witnessed strong growth – exchanges in China, India, Singapore, Thailand, and Malaysia performed well. Low global interest rates are driving liquidity back into equity markets. Internationally, the outlook remains positive

In line with global trends, all three stock market indices in Mauritius went up – the SEMDEX by 35%, the SEM-7 by 30% and the SEMTRI by 44% during the period under review. Greater investors’ interest for equities was motivated by corporate restructuring, share buy-backs and solid earnings results of some bellwether stocks (trend indicators or blue chips). The gradual change in the Bank of Mauritius’ monetary policy in lowering the Lombard rate to 9.5% (as at 29 January 2004) also contributed in making the stock market more attractive.

Fund/Investment/Portfolio Managers

The FSC Survey 2013 covered some 12 Fund/Investment/ Portfolio Managers that are involved in intermediating in financial securities markets and which are licensed under Section 14 of the FSD Act 2001. In aggregate, these entities manage some 14 Investment Schemes (for those disclosed) which are based locally

The aggregate assets base of the 12 companies that this segment comprises amounted to Rs 1.7 billion in 2003, compared to Rs 822 million in 2002. Ninety-six percent of total assets are attributed to the largest Investment Manager, which is a parastatal institution.

The total liabilities of the 12 companies amounted to Rs 1.5 billion in 2003 compared to Rs 706 million in 2002 (the bulk being attributed to the largest Investment Manager mentioned earlier and which are in the form of long-term interest-bearing borrowings).

FSC Survey Results on Pension Administrators, Actuaries & Treasury Managers

In the period under review, the FSC Survey 2003 included 4 companies that fall in the category of “Financial Service Providers & Market Professionals” and which are licensed under Section 14 of the FSD Act 2001. Two of those companies are licensed as Pension Administrators, 1 as an Actuary and 1 as a Treasury Manager

The aggregate asset base of the 4 companies was Rs 14.6 million in 2003, compared to Rs 11.8 million in 2002. Total liabilities in 2003 experienced growth of 51% from the previous year and reached Rs 7.3 million. Total income for 2003amounted to Rs 30.6 million representing an increase of 35% over the previous year. Sixty-one percent of this income were generated by the Actuary. Total expenses for the 4 companies reached Rs 28.5 million in 2003, out of which 55% were for salaries & allowances. Total profit before tax for 2003 decreased by 18.4% and reached Rs 2.7 million.

Mutual Funds & CIS

The Survey revealed that for a total value of investment of US$ 30.7 billion in 2003, 29% related to information & communication technology (US$ 8.7 billion), while 12% of the investments related to financial institutions and financial investments (US$ 3.7 billion). Chart 16 shows the total investment breakdown by activity

For the period ending 30 June 2004, the total number of authorised CISs on the FSC’s Register was 293 – representing an increase of 22 during the period under review (although this figure includes 72 CISs that are in the process of winding up). The Net Asset Value of the authorised CIS was US$ 12.2 billion as at 30 June 2004, compared to US$ 6.6 billion as at 30 June 2003. For a reporting population of 185 CISs covered in the FSC Survey 2003 (representing 66% of the total CISs authorised as at 31 December 2003), the total value of inward investments into foreign countries amounted to US$ 7.1 billion, while the total value of outward investments from foreign countries amounted to US$ 3.7 billion in 2003.

Conclusion

The Commission’s initiatives relating to the enhancement of consumer knowledge and protection will play a major role in helping consumers understand financial products and to use the financial system more effectively. We see them as important tools to promote confidence in the financial system.

However, consumer knowledge-building is a vast and costly undertaking that cannot be achieved in solo. A shared sense of purpose is required from the industry, consumer associations, the Government and the media.

SOURCE - Financial services commission (FSC) (public source)