In the article you will find out:

• Which funds managing assets exceeding 4 bln. euros do we compare?
• Development of financial markets in the first half of 2021
• Comparison of dynamic strategies (SRRI 5 and 6)
• Comparison of balanced strategies (SRRI 4)
• Comparison of conservative strategies (SRRI 3)
• Summary and discount

We compare funds with assets exceeding 4 bln. euros in value. Which are those?

We always try to include the most popular mutual funds in our regular half-yearly comparisons. The supply of funds changes over time and, always depending on the situation, banks or financial agents push for the sales of some of them. Mutual funds are also renamed and merged, so the list of compared investment solutions does not remain unchanged every six months.

The basic parameters in selecting funds for comparison are the size of the fund and net sales in the past period. A sufficient history of the fund and the institution to make the data relevant is also a requirement. We also target the representation of all key asset managers in Slovakia.

We then compare the funds with our portfolios on the basis of the same risk category. Mutual funds are required to determine their risk/return profile based on the SRRI methodology of the European Securities and Markets Authority (ESMA).

It divides the funds into 7 risk classes according to the risk measured by the unstableness of the value of the share certificate (volatility) and according to the return. We classify our portfolios in the same way and compare investment solutions within individual risk classes.

We have set 29 mutual funds from risk classes 3 to 6 side by side with Finax's portfolios. Slovaks have assets worth 4,17 bln. euros (as of 2.7.2021) invested in these funds, which represents more than 40% of assets managed by funds in Slovakia. Last year alone, Slovaks poured a net amount of 932,8 mil. euros into mutual funds.

The growing interest of Slovaks in investing is pleasing but still insufficient. In addition, the structure of financial wealth remains inefficient and does not lead to the desired results, although in this area, too, financial education done by financial institutions, agents and the media is causing a shift in the right direction.

Mutual funds are characterized by higher fees. Revenues from them are associated with tax liability and, compared to other solutions, they usually offer a lower appreciation at the same risk, as we will show in this article.

Finax's portfolios cost 1,2% per year or less due to discounts, and the returns of the ETFs from which we make up the portfolios are tax-free for Slovak residents after one year of holding. In addition, the 10 ETF funds we use together invest in approximately 12 800 shares and bonds.

Four managers of these funds currently manage assets in excess of 12 trillion euros, an incomparable, more than 1000 times higher value than the assets under Slovak asset management companies.

For a broader picture of the comparison, we also present the total costs of the fund, which were deducted from the fund's assets last year, in the list of mutual funds. As of 30.6.2021, we evaluated the following funds managed by these asset managers:

The source of the data is the Key Investor Information Documents published on the websites of fund managers and the weekly data of mutual funds of the Association of Asset Management Companies as of 2.7.2021.

365.invest, former Prvá penzijná, the asset management company of 365.bank (former Poštová banka):

• 365.invest – Mixed Capital; 1,68%,

Asset Management Slovenskej sporiteľne, the management company of the largest Slovak bank:

• AM SLSP Maximized Returns Fund; 1,70%,
• AM SLSP Global Stock; 1,68%,
• AM SLSP Active Portfolio; 1,64%,
• AM SLSP ŠIP Klasik; 1,13%,

Amundi Asset Management, Europe's largest asset management company:

• Amundi Funds Pioneer Global Equity A EUR (C); 1,90% + 20% of the return above MSCI World,
• Amundi Funds Global Equity Sustainable Incom A2 EUR ©; 1,75%,
• Amundi Funds Solutions – Balanced EUR; 1,83%,

ARTS Asset Management, C-QUADRAT group:

• C-QUADRAT ARTS Total Return Global AMI; 2,77% + 20% of the return above EURIBOR 3M,

ČSOB Asset Management, the asset management company of the 4th largest bank ČSOB:

• ČSOB Growth; 2,02%,
• ČSOB Balanced; 1,80%,

Eurizon Asset Management Slovakia, the asset management company of the 2nd largest bank VUB, together with the Italian asset manager’s funds distributed by Eurizon:

• Eurizon Fund Azioni Strategia Flessibile R (VUB); 2,03% + 20% of the return above benchmark,
• Eurizon Manager Selection Fund – MS 70 R (VUB); 2,18%,
• Eurizon – Balanced Growth (VUB); 2,80%,
• Eurizon – Dynamic Portfolio (VUB); 1,67%,
• Eurizon – Active Magnifica (VUB); 1,48% + 20% of the return above EURIBOR 3M + 1,5%,
• Eurizon Manager Selection Fund – MS 40 R (VUB); 1,97%,
• Eurizon – Flexible Conservative (VUB); 1,38% + 20% of the return above EURIBOR 3M + 1,2%,
• Eurizon – Active Bond (VUB); 1,39% + 20% of the return above EURIBOR 3M + 1,2%,
• Eurizon – Conservative Portfolio (VUB); 1,11%,

IAD Investments, the oldest asset management company in Slovakia:

• IAD – Global Index; 3,65%,

Tatra Asset Management, the asset management company of the 3rd largest bank Tatra banka:

• TAM – Global Stock; 1,33%,
• TAM – Private Growth 1; 1,55%,
• TAM – Smart Fond; 1,30% + 15% of the return,
• TAM – Private Growth; 1,25%,
• TAM – Premium Harmonic; 1,34% + 15% of the return,
• TAM – Dynamic Bond; 1,25% + 15% of the return,
• TAM – Balanced; 1,46% + 15% of the return,

UNIQA investment company, the asset management company of the insurance company UNIQA (formerly AXA):

• UNIQA Selection Global Equity; 1,82%,

How did the markets perform in the first half of 2021 and what influenced their development?

Financial markets have entered 2021 riding on the wave of optimism that has persisted throughout the year. The development of financial asset prices is primarily influenced by the "return to normal" from the coronavirus pandemic and the global recession caused by the closure of economies.

At the beginning of the year, the vaccination of the world's population began, which, together with tougher measures during the winter months, led to a decline in new cases and the reopening of economies. The recession was sharp but did not wreak as much havoc as originally expected. Unemployment either did not reach dizzying heights or did not stay at undesired levels for a long time.

In addition, governments and central banks have intervened sharply, and stimuli in many countries have exceeded the real needs of society. Consumers, boosted by savings and state aid, set out to catch up with last year's deferred consumption.

In many cases, we are witnessing record or for years unprecedented levels of macroeconomic data. We have even lived to see inflation that the world has longed for longer than a decade.

These facts are positively reflected in the demand for financial assets, but also in the management of companies themselves. The profit growth of the companies of the American S&P 500 index is on a good way to achieve an 85% year-on-year change in the second quarter, which we last saw at the end of 2009.

The cocktail of these positive fundamentals cannot result other than in the growth of stock markets. And it’s been really robust so far. From the beginning of the year to the end of June, the modeled 100% equity portfolio recorded a gain of 16,5%.

Note: All data related to the historical development of Finax portfolios are modeled and were created based on backtesting of the data. We described the method of historical performance modeling in the article How do we model the historical development of Finax portfolios. Past performance is no guarantee of future returns and your investment may result in a loss as well. Inform yourself about the risks you are taking when investing.

This year's increases in equity ETFs range from 12% to 23% in the first half of the year. The following chart shows the development of the basic stock classes that make up Finax's portfolios for the year from 30.6.2020 to 30.6.2021.

The change in the position of performance leaders during the last year is definitely worth attention. While in previous years, the shares of large American companies represented by the S&P 500 index clearly dominated, their performance fell behind small and medium-sized companies in the past year.

The post-crisis development so far confirms the sense of diversification and highlights the risks of betting on one card or on assets with the highest valuation in the previous period.

Bond investments did not record a good half-year. Bond prices were falling under the weight of fears of rising inflation and potentially higher interest rates during the first months.

Dynamic investments (risk classes 5 and 6)

Finax's four most dynamic portfolios with the share of stocks ranging from 70% to 100% belong to risk class 5 as of 30 June 2021 according to the SRRI methodology.

The 100% equity portfolio achieves an annual performance of 34,3% at this date and comfortably beats all relevant competitors in terms of returns, by an average of 17,87 percentage points. The net performance the best of them achieved in the same period was lower by more than a third.

The sharp rise of the markets from the bottom in March last year led to a return of 5-year and 10-year performance to a double-digit average annual appreciation above the long-term average. Passive investing paid off for investors last year as well.

The development of client accounts confirms the high appreciation in the past year. So far, during the more than three-year history of the trader, Finax clients have appreciated their funds by 18,7 mil. euros.

You can watch the current performance of growth strategies in the transparent accounts of Dominik Hrbatý and Ivan Chrenko.

If we also look at riskier funds whose volatility (value unsteadiness) exceeds that of Finax's most dynamic strategies, the picture will improve slightly.

However, in terms of net after-tax return, they did not exceed the 100% equity portfolio of Intelligent Investing during the past year, as was the case at the end of last year.

The results confirm that in the short term, some active asset managers are able to outperform the market in terms of returns from time to time, but in the long run, it is difficult, if not impossible, to repeat these results.

In addition, it is necessary to realize that they achieve these lower returns at a higher risk, ie. their return-to-risk ratio is significantly worse than Finax's passive investment, which replicates market composition and market returns.

This provides further proof of the fact that passive investment currently offers an unrivaled solution from the standpoint of returns and risks.

Balanced strategies (risk class 4)

From the Finax portfolios, those with 30% to 60% representation of stocks fall into this category. Even with balanced strategies, Intelligent Investing portfolios dominate.

The C-Quadrat ARTS Total Return Global AMI fund was the only exception last year. In the longer term, however, the dominance of passive portfolios is clear.

Conservative strategies (risk class 3)

Bond markets, given the characteristics of traded instruments such as exact maturities, a very wide range of different types of bonds, a number of OTC trades with arbitrage options, higher data sensitivity, or a significantly higher share of professional investors, offer opportunities for active asset managers and room for performance variability.

That’s why more conservative mutual funds remain the most competitive alternative against similar Finax portfolios. This was confirmed by some of them last year when mutual funds which outperformed Finax's conservative portfolios could be found in this risk group.

Nevertheless, even here the passive approach wins on the Slovak financial market in the long run.

In July, Finax launched a new conservative investment product, the Intelligent Wallet, which aims to overcome inflation and offer sufficient evaluation even for short-term savings with a horizon of up to 3 years.

According to the SRRI methodology, this is the portfolio with the lowest risk profile, taking into account volatility and achieved returns among Finax's strategies. Given these parameters, the results are very pleasing. With the Wallet, we managed to achieve the desired - increasing the return while reducing the risk.

Summary and discount for the transfer of disadvantageous investments

The development of investments in the last year confirms an important fact in the management of money, namely that postponing investments does not pay off. Only invested money earns returns. Waiting for an ideal opportunity often results in greater losses in the form of unrealized gains, compared to losses suffered during market downturns.

More than a year ago, when the pandemic broke out, we made it clear that, in the end, the recession and the collapse of the markets would only be a huge opportunity. More than a year later, stock market growth has exceeded 70% since the bottom. Honestly, how many of you have utilized this great opportunity...

The best time to invest was yesterday, even better a year ago. It will be worse tomorrow. Don't postpone important life decisions to which building wealth clearly belongs. Start as soon as possible so that you don't have to regret not investing again in half a year or in a year.

The year 2021 so far confirms that for the vast majority of investors and people who think about their future, passive investing represented by Finax is the most effective form of building wealth. This should be the investment basis for personal finances, given the returns, tax benefits, and widely diversified risk involved.

If you are already investing, consider whether it could not be done better. Find out all the fees, real evaluation, and risks of your products. We will be happy to help you with that.

Transfer your investments to a better alternative. Thanks to a higher quality solution, you will achieve your financial goals and independence sooner. Start valuing your savings effectively.

In addition, Finax offers you an attractive discount. If you transfer your investment from the competition to Finax, we will manage 50% of the transferred amount for 2 years free of charge. Invest even more profitably.