Inv. Funds hold CYP 50 mln in cash

- Investment company assets at CYP 230 mln
- 15% of portfolio 'parked' in related parties

Approved Investment Companies are holding CYP 49.36 mln in cash, or 21.5% of their total assets according to stock market filings for the period ending December 31, 2002, giving them the munition to buy stocks on the cheap, pushing the market up.
Demetra Investments (DEM), the island's largest investment company, makes up the bulk of the cash holding, accounting for CYP 34.6 mln or 70% of the total cash holdings, placing it in the advantageous position of picking up bargains at the current depressed prices.

Interfund follows next with CYP 4.24 mln cash, followed by Cytrustees with CYP 2.85 mln, Apollo with CYP 1.88 mln and Aiantas with CYP 1.4 mln in cash. The rest hold cash balances below CYP 1 mln.

ASSETS

Demetra is also ranked first in terms of assets, with total assets at the end of 2002 amounting to CYP 111.44 mln, a far cry from the initial capital of the company, which at the time of listing had CYP 200 mln in cash, about half of which has vanished from the collapse in equity prices.

The total assets of all approved investment companies at the end of 2002 amounted to CYP 229.2 mln, half of which is contributed by Demetra.

The figures are slightly distorted by the fact that Harvest, Unigrowth and Phinikas had not filed their 2002 portfolio mix by January 21, when our report was compiled, which is why their most recent asset amounts have been taken from the latest available reports.

The demise of the investment companies is also evidenced by the fact that the second largest company in terms of assets, Interfund, with CYP 19.59 mln by the end of 2002, represents 10% of total assets and is about one-sixth of the size of Demetra.
Aiantas is the third largest fund in terms of assets with CYP 19.09 mln, followed by Cytrustees with CYP 15.9 mln, Dodoni with CYP 13.04 mln and Apollo with CYP 10.86 mln. Jupiter and Era Split belonging to the Elma Group follow next with assets of CYP 9.1 mln and CYP 7.7 mln respectively.

The remaining 16 out of the 24 investment companies in the sector have assets below CYP 5 mln with the majority in the CYP 500.000 to CYP 2 mln range.

RELATED PARTIES

While the sharp decrease in the asset size of the approved investment companies is a cause for concern, even more worrisome are the large balances invested in related parties or stakes in which the funds have a direct or indirect interest.

This is a particularly sensitive issue for the funds, since with the exception of a few, the majority opted not to report their direct and indirect interest in the holdings.
According to preliminary estimates made by the Financial Mirror, about CYP 33.25 mln has been invested in related parties where the funds hold a direct/indirect stake, representing 14.5% of total assets.

Demetra, Interfund, Aiantas and Ischis are the exception to the rule, having indicated the level of interest in their ten largest portfolio mixes by the end of 2002. The rest are estimates by the Financial Mirror, which will no doubt be contested by some of the funds, but are believed to be close to the actual figure in view of the recent alliances and cross-holdings done by some of the funds.

In an effort to be fair, we have also included the holdings of Cytrustees in Bank of Cyprus shares, those of Apollo in Laiki Bank and Athena's stake in Hellenic Bank as related parties, in view of the close connection between the funds and the banks controlling them.

OTHER SECTOR

While most of the approved investment companies have stayed within the basic guidelines of the CSE/SEC by keeping their holdings in related parties to 10% or below, the reverse is true in the case of investment companies which fled to the Other Companies sector.

Leda and Regallia appear to have invested most of their assets in related parties. According to estimated by the Financial Mirror, Leda had invested 87%, or CYP 1.77 mln of its total assets amounting to CYP 2.02 mln in related parties and cross holdings in other group related companies.

Based on an indication by Regallia, the firm holds 70%, or CYP 2.13 mln of its assets totaling CYP 3.05 mln in related parties. Athena, boasting total assets amounting to CYP 27.2 mln is estimated to hold about 16% of its assets in related parties, which include the likes of Hellenic Bank and the Sharelink Group.

Efremico and Unifast that had previously fled to the Other companies sector had not yet reported their 10 largest portfolio mix.

BOC MOST PREFERRED

The titles of Bank of Cyprus (shares and warrants) remain by far the most preferred investment choice for the funds, with the total holding of the funds in BOC titles approaching CYP 22 mln or 9.5% of the total. Including the holding of Athena, the total investment in BOC titles rises to CYP 24.25 mln.

The titles of Laiki Bank are the second most preferred titles with CYP 13.8 mln or 6% of total fund assets, followed by the titles of Hellenic Bank with CYP 8.5 mln or 3.7% of the total share.

Three funds, led by Demetra and followed by Cytrustees and Apollo, have also reported having invested in government bonds to the tune of CYP 8.55 mln among their ten largest holdings. The CYP 6.77 mln investment by Demetra in government bonds makes up 6% of its total assets and exceeds by far its holdings in foreign investments.

NO INTEREST ABROAD

The collapse in equity prices abroad, especially on the Athens Stock Exchange, which caused funds investing there to sustain heavy losses, has apparently forced most to cut their foreign holdings to a minimum with some even abandoning overseas markets for good.

The total holdings of the funds in foreign investments amounts to only CYP 6.8 mln or 3% of total assets, a very small percentage considering that investment managers usually advise private investors to diversify their asset mix.

Among the large funds, Apollo is by far the most committed, having placed 20% of its assets or CYP 2.08 mln in overseas markets, some of which are in cash funds while others are in Laiki mutual funds.

Next follows Cytrustees with CYP 1.34 mln invested abroad, mostly in UBS funds while Demetra, the largest fund in terms of assets, holds a tiny 0.9% of its funds in foreign holdings amounting to CYP 1 mln.

Among the smaller funds, Perseas is the most aggressive, holding CYP 414.000 or 33% of its portfolio abroad, followed by PSD with CYP 170.000, or 30% of its assets and Confine with CYP 571.000 or 28% of its portfolio mix in foreign investments.

REPORTING QUALITY

Irrespective of the hit sustained by the funds during the last three years, with most trading at a discount compared to their net asset values (NAV), the other characteristic true for all funds is the quality of reporting, which has improved tremendously.

The Securities & Exchange Commission (SEC) and the CSE Council should be congratulated for having persuaded the funds to file their 10 largest holdings in a uniform and timely manner, which allows investors to make a better comparison of the portfolio mix before deciding to invest or exit out of the various funds.