Investment funds are a comparably new thing in Croatian financial market since until 1995 there was no legal framework which would regulate the work of such institutions. Establishment and manner of operation of investment funds and the companies managing the funds in Croatia have been regulated by the Investment Funds Act from 1995 and the new Investment Funds Act of December 2005. Investment funds are established on the basis of approval of the state regulatory authorities and in Croatia such authority is HANFA. Operation of investment funds is managed by the companies for fund management. With establishment of PBZ Invest d.o.o., PBZ d.d. significantly contributed to initiation and development of the fund industry in Croatia.
According to HANFA's data, the open-end investment funds with public offering are currently managing HRK 12,579b of assets. The flow of assets managed by the management companies is shown in the following picture:
The picture shows a sudden growth of assets in the period 2005-2007. Apart from achieved high yields, the basic reason for intensive growth of the assets managed by open-end investment funds with public offering is affirmation of the capital market through sale of Pliva and the IPO of the INA and T-HT shares. At the end of 2007 and especially during the first half of 2008, the domestic and foreign markets experienced a correction of prices which influenced a significant decrease of managed assets due to the fall of the price of securities causing a sudden, almost panic withdrawal of units from investment funds with public offering in the period from February to April 2008.
Simultaneously with development of the fund industry, the need for establishment of new funds of different kinds and different investment strategies was emerging. In the table above one can see an exceptional increase of the number of funds. It is important to point out that the first years of development of the domestic fund industry were marked by domination of cash funds, both in terms of their number and assets. During 2006, balanced and equity funds took the lead, not so much in terms of their number as in terms of the managed assets.
Considering the types of funds in terms of assets, the picture above once again shows the trends of investment fund development in the Republic of Croatia.
It is visible that the average domestic investor first made non-risk investment into cash funds. As the interest rates fell, the assets from cash funds started flowing to bond funds and balanced funds. In the last two years, there is an intensive transfer of assets not only from cash and bond funds to the balanced and equity funds, but also the transfer of assets from the classical ways of saving to investment funds. As the capital market and consequentially the fund industry continues to develop, domination of equity and balanced funds will definitely continue to grow compared to the safer types of investment funds.