This week we have celebrated the 15th birthday of one of the oldest and most successful (maybe these two correlate with each other) open-ended investment funds in Hungary, namely of Concorde 2000. Although in the Western world this age is not considered a high one, it is a remarkable age in the short history of the mutual fund market in Hungary. As ‘Mr. Retired’ (our colleague) would say: „in Hungarian capital market each year means two.” Out of the almost 600 domestic funds in theBAMOSZ database there are no more than 21 working at least for 15 years. Moreover, the name and investment policy of most of them has changed since the beginning.
Concorde 2000 has remained changeless in both respects: the balanced fund investment policy, based on investing one-third of the funds in equities and two-thirds in bonds has been worked out in such a way that the risk is not too high for the Hungarian small investors, and at the same time stocks (and our investment decisions) could contribute to reaching of higher long-term yields than the interest rates on bank deposits (or short term bond yields).
We feel that loyal investors of Concorde 2000 have not repented their decision. Let’s see why!
One million HUF invested 15 years ago have become HUF 5 million 511 thousand by now. This is an average annual return of 12.04%. This is a net return, remaining after the deduction of all fees. (More than that, those clients who have preserved their investment units since the beginning, are tax-exempt.)
The benchmark of Concorde 2000 has an annual average of 7.3% return during the last 15 years.
Over the past 15 years one could achieve an average annual return of 10% with Hungarian government bonds, while BUX has increased by 6%, and the global stock index in HUF has increased by hardly more than 3% (only 2.3% in USD terms). Consequently, Concorde 2000 has reached a better yield than the either domestic and foreign equities or government bonds (and bank deposits), even under very bad stock market conditions.
Although the average annual return of Concorde 2000 is only with 2%points better than the return one could earn on Hungarian government bonds, during a period of 15 years this means a lot. If we calculate with a HUF one million initial investment, the investors of Concorde 2000 are richer now by HUF 1.3 million than they were if they had invested into government bonds. (Not to say that if we take into account the interest rate tax and transaction costs of purchasing government bonds, the advantage of Concorde 2000 is at least HUF 2 million.)
Over the past 15 years, taking into account the inflation data of KSH (Hungarian Statistical Office), HUF has suffered an annual loss of 6.9 % of its purchasing value. This means that 2.7 million present-day HUF are equal to HUF 1 million15 years ago. Meanwhile one million HUF invested into Concorde 2000 has increased to HUF 5.5 million. The difference is more than the average salary for one and a half year.
Source: Concorde Asset Management, Bloomberg
Taking into account the value of the Concorde 2000 investment units bought (and redeemed) by investors over the past 15 years, we can calculate that out of the HUF 4.9 billion NAV of the Fund at present, the amount invested by investors is only HUF 1.1 billion. The remaining amount, i.e. HUF 3. billion is the return.
We hope that in 15 years from now we can riport similarly good results.