“Usually, the capacity of investors to take a risk is lower than they think. Investors do not always understand the difference between the risk they want to take, to benefit from higher returns, and the risk they have the capacity of taking,” said Nicolae Albu, Investment Manager of Erste Asset Management (EAM) Romania.
Last month, equity funds, the riskiest on the market, attracted a mere 45 new investors, who contributed 2.6 percent of the RON 214 million (€51 mln) introduced onto the market.
“In the summer of 2007, the public did not seem interested in risk parameters, considering that the market would increase anyhow, but things are different today, and must be well understood,” Mihail Ion, President of Raiffeisen Asset Management (RAM), said.
The crisis made the use of risk indicators published by the Association of Fund Administrators (AAF) more difficult, as these currently require corrections. “The “Value at risk” (VaR) indicator indicates the maximum potential loss of an investment, with a probability of 95 percent, but the values registered one year ago were exceeded by the present reality, because “the market was subject to an extreme situation, which repeats at intervals of several decades. The drastic correction was within those five percent chances for the loss to exceed the level indicated by VaR. If we had used a VaR with a probability of 99 percent, then its value would have been higher, and the effective loss would not have exceeded VaR,” Ion added.
