1. Hungary and Poland show promise
Poland and Hungary's insistence on an orderly changes in Poland and Hungary (ISPs), investment fund managers,
should stimulate the market unit linked products and
privatisation has ensured that their financial considerably. The pension intermediaries. Minimum capital
markets now function smoothly reforms, passed in 1998 in requirements for ISPs have doubled,
Hungary and quickly. followed and minimum qualifications and
by Poland in 1999, have made experience has been increased.
IBy Anna Bawden the law will only come into force private pension provision ob
when Poland joins the EU. And the ligatory for those, the majority, The limits placed on the amount
FOREIGN interest in Eastern Europe Hungarian authorities require foreign without occupational schemes. that could be invested have been
has generally taken the form of providers to have a local presence. PwC estimates that "in 2002, relaxed and fund of funds, index
M&A activity, which has seen large Slbn inflows into Polish funds funds and derivative products are Croatia, Czech Republic and ket. Life insurance and particularly
swathes of domestic banks purchased will come from pensions." now permitted. Importantly, the act Slovakia, but not in Poland. unit-linked products are taking off.
by foreign providers such as ING, Regulation The reforms have already makes it easier for foreign providers Christian Petter, director says this is With a steadily increasing number of
Citibank and the like. In terms of regulation, the story is prompted a number of foreign to sell into Hungary. because the high registration fees are foreign providers such as CGNU,
somewhat different. Robert Stone, insurance companies to enter a disincentive to smaller providers. Allianz and Generali in the Polish
director of global financial services the Polish and Hungarian Zoltan Dencs, head of the Capital and Hungarian market, brokers and
Distribution of foreign domiciled at EME, an emerging markets market, bringing with them a Market Licensing Department at the Citibank has different distribution other intermediary associations axe
funds in Eastern Europe is more consultancy, says: "While Poland network of intermediaries. The FSA says: "Foreign providers still channels for its Polish and starting to gain in popularity. The
limited. With the exception of and Hungary wanted an orderly, well greater visible presence of need approval from the FSA but the Hungarian business. In Hungary, the industry is clearly still nascent, as
Pioneer, most non-domestic regulated market from the beginning, advisers is already stimulating procedure for approval should just be company does not sell its own funds there are currently only 12
providers are German or Austrian. the Czech Republic was the development of the inde a formality" at present but distributes third party brokerages/ intermediary
pathologically hostile to regulation." pendent intermediary industry, distribution. associations in Poland and Hungary,
The key markets are the Czech which until now has been very most targeting the expatriate market.
limited. Hunter & McKensie is one of these
Republic, Hungary and Poland. Distribution At present it distributes five third
Darius Nowak, a partner at He points out that Poland and Licences are required both to with 20 brokers throughout Eastern
Mutual fund distribution is still party funds; the Credit Suisse
PricewaterhouseCoopers responsible Hungary set up securities act as an intermediary, broker Europe, operating as independent
largely dominated by banks. In Hungarian bond fund and Aegon
for investment management in commissions immediately after the or agent, and to sell funds or advisers. Over half of these are in
Hungary, funds cannot be sold asset management's four funds.
Eastern Europe, says that the easiest fall of the Communist regime, and insurance products in Poland Hungary and Poland.
directly by the provider; a local Bence Marosi, country head,
access to the market is in the Czech did not rush into mass privatisation. and Hungary. The industry is
broker/dealer or retail bank must be Citibank says: "Citibank Hungary
Republic. He says: "It's the only The Czech Republic, on the other regulated by the SEC in
used. Third party distribution and has a three pillar distribution
country in the region where you can hand went down the messy path of Poland and the Financial Ser
joint ventures/ acquisitions of local channel: our own branches,
distribute foreign funds. In mid 2002 voucher privatisation. vices Authority (FSA) in Hun
banks are therefore highly popular. transactional phone banking and our
they want to pass legislation which gary. Intermediaries and prod Hungary and Poland, along with
direct sales network."
will be fully compatible with the uct providers also need a local the Czech Republic, are leading the
The length of time it took to custodian bank. Raiffeisen International Fund way in Eastern Europe. Martin Gisa,
ITcir': r1;r-t;ves."
privatise and list companies in Hungary has just introduced Advisory is sixth largest in Hungary, In Poland, Citibank distributes head of Central & Eastern European
Poland and Hungary meant that the the Capital Markets Act which with 3 per cent of the market. It five of its own funds and offers a financial institutions at
stock exchanges and regulations came into force in December. provides advisory mandate, fund of discretionary portfolio service to Hvpovereinsbank says: "Hungary is
In coriparison, Poland and were functioning smoothly when this It draws together and expands funds and fund distribution services institutions and HNWIs. It currently one our most successful markets. We
Hungary are not quite so open. Mr did eventually happen. previous legislation under one through its 40 branches. The fund has about $200m under see Hungary and Poland as being
Nowak points out that although single act. A wide ranging management is done out of its management, split equally between normal markets. We view them as we
Poland has also passed legislation piece of law, the act regulates Austrian headquarters. the two business areas. would
allowing the promotion of foreign Stimulation
funds, More recently, a number of investment service providers Raiffeisen is also present in Insurance is a growing mar
France or Italy, for example."