Demographic changes and succession with a great challenge. The president of the largest TFI in Poland assesses the market
Maciej Rudke, Business Insider Polska journalist: Investment funds in Poland are not very popular. For several years it has been seen that the growth rate of their assets is much lower than the increase in deposits in banks. What does it result from?
Rafał Madej, president of PKO TFI: This is true, although recently the situation has improved significantly, the inflows have accelerated rapidly. Of course, there are many challenges, one of them is regulations. The implementation of the MIFID requirements a few years ago effectively hindered the distribution of funds. Despite very good results over the last 2-3 years, the scale of inflows to joint funds has disappointed. Expressed inflows for debt funds appeared since mid -2023, and last year was record -breaking in this respect. We are slowly rebuilding the customer base, which for the entire market at the end of 2024 has approached 2.5 million (excluding PPK). This is undoubtedly pleasing, but it is worth noting that it is still less than in 2008 …
What next? As the head of the largest TFI in Poland, do you count that the situation will start to improve for the industry?
I am a moderate optimist. I hope that there will be a gradual change in the structure of household savings and more money will start flowing from deposits towards the capital market. Already 2024 brought a clear improvement, the scale of influx was impressive, although mainly defensive funds operating on the debt market still dominated. I hope that we are entering a clear trend, which will result in the dissemination of retail investment funds among customers.
Where do you get reasons for optimism?
The high share of current deposits in their portfolios is a powerful reservoir, banks do not fight for deposits because they are very smooth. When entering the path of interest rate reductions, you should expect a further saucer of attractiveness of deposit offers, with the simultaneous increase in the attractiveness of debt funds.
Recently, we got to know the inflows to TFI for March. While the balance was generally positive, it again happened due to debt funds, and joint -stocks struggled with discontinuations. This may seem surprising, considering the bull market and increases in indexes on the Polish stock exchange.
I expect that it is still mainly debt funds that will achieve a positive inflow balance. For bank clients, debt funds are – of course to some extent and conventionally – an alternative to deposit. Regulatory changes meant that one of the key assumptions was the elimination of the conflict of interest and equalizing solutions based on various asset classes in motivational systems. As a result, advisers are easier to offer a more defensive product, by nature safer (with lower variability), which facilitates “managing” customer emotions.
The second factor resulting in less interest in traditional share funds is the development of investment platforms offering ETFs. The simplicity of solutions, price transparency, friendly processes effectively attract the attention of a growing number of investors.
Did customer protection do not go too far? Chairman of the Polish Financial Supervision Authority Jacek Jastrzębski recently said that the requirements of MIFID II or information documents for the client have evolved in such a way that they became more insurance policy for financial institutions than they constitute value for the client.
It's hard to disagree with this thesis. It seemed that the adjustment screw would only be tightened. The narrative of the chairman of the PFSA rationalizes this trend, which I personally enjoy. It seems that the European requirements of RISP (Retail Investment Strategy Package, a proposal to protect retail investors – ed.). If we want to build a culture of risk acceptance, which the PFSA also talks about, regulations should not paralyze activity in this area.
There will be no return to the world from before Mifid II, but it is worth emphasizing that the regulations effectively addressed some challenges and eliminated not always healthy practices in the area of distribution.
The regulations protecting customers will still be quite strict, there is no point in limiting, e.g. MIFID II. In such conditions, do you see the chances that customers will invest in the stock market using TFI even similarly as commonly as in the famous Hoss from 2006-2008?
I don't think that can be repeated on a similar scale or proportion. Please remember that we are in a completely different world. Megatrendy: consumer protection, digitization, AI development, democratization of services and client -centrism have successfully changed “game rules”. The 2008 crisis is still alive in the memory of many clients and advisers working in banks. Today, markets have mastered fear and uncertainty in the context of geopolitical challenges and customs policy communicated by President Trump. That is why I believe that in the coming years the fund market will base its development mainly on debt funds, the component of the campaign will be more and more space in retirement programs such as PPK, IKE and IKZE.
For such TFI as yours – from a business point of view – is it more profitable to sell bond or joint fund units?
For us, the most important thing is the scale of action, because the strongest megatrend for the entire Asset Management industry are melting margins. The margins are under regulatory and business pressure. The very structure of net flow is a derivative of client preferences, market situation and policy implemented by distributors.
Distributors, understanding the growing expectations of clients in the area of multiplying assets, will focus on improving experience, simplifying processes and effective addressing regulatory challenges. The result will be better identification of customer needs, a departure from monoprod sales in favor of a portfolio approach, development of new functionalities and an increase in the importance of remote channels, especially at the after -sales service stage. Branches and advisers will keep a leading role in distribution and advisory models, but will be more and more supported by technology.
I will return to the structure of the savings of Polish clients. Or a new tax profit tax model Can it contribute to its improvement and better use of the capital of Polish investors?
The current structure is not optimal and its change should be stimulated. The proposal of the Ministry of Finance in the field of tax incentives can help in this. Relief in tax profits in the case of long -term investments – i.e. reduction or even exemption from this tribute after a given period – would extend the investment horizon of clients. This solution would also be intuitive and easy to implement.
I support this solution because it effectively addresses the main ills and barriers to the industry development: a short investment horizon and still lower than in 2008 the number of investors. Tax encouragement can effectively stimulate the development of the capital market, but there will be no remedy for all its problems. Other activities are also needed, including education, evolution of distribution models, making the product offer more attractive.
Maybe TFI should focus more on improving the attractiveness of their products, taking into account the “passive revolution” and growing pressure from ETFs?
We clearly feel the growing business pressure from suppliers offering simple and cheap solutions. For global tycoons such as Blackrock or Vanguard, offering low-margin ETFs means the need to operate on an even larger scale. Our local market has grown on funds actively managed with higher fees. Building a scale will be possible if we effectively take care of good risk management and offering attractive rates to our clients. We see the growing popularity of ETFs and we introduced funds based on stock indexes a few years ago.
The Polish TFI market is crushed and very diverse in terms of the size of individual players. Pressure for profitability will push the industry to consolidation?
On the one hand, we have melting margins, but on the other, great potential for business growth measured by assets. Entities with access to large distribution networks will grow organically.
For other players, mainly independent TFI, the natural direction of development and scaling of business can be a acquisition path. Building your own distribution is difficult and requires time, leaders of this segment effectively diversify distribution channels through presence in banking networks (mainly private banking) and the expansion of their own sales structures.
There is a lot of talk about generational changes and the succession of the property. For the asset management industry is it a chance or a challenge?
This is a global challenge, emphasized in many reports and mainly regarding developed markets. UBS estimates that in the next 20-25 years $ 83 trillions will flow between generations in the world. In the case of Poland, it will be the first great wave of intergenerational transfers, because we have not historically experienced the so -called flows “Old Money”.
UBS analysts not only pay attention to the scale, indicate directions – horizontal (intra -generational resulting from the average life expectancy of women and men) and vertical (intergenerational). Demographic changes, succession, rising wave of transfers are also important challenges for TFI. Therefore, banking groups must recognize the needs of the young generation of investors and ensure that the offer of investment funds remain attractive to them.
The year 2024 was successful for PKO TFI, for a year your assets grew by 37 percent, to PLN 55.8 billion, and you strengthened in the chair of the leader. What are your plans for 2025?
We are the only one of the large banking TFI, which in recent years significantly increased market shares. For 15 years we increased them to 21.5 percent. From 14 percent, we multiplied assets, and not everyone succeeded. We assume that 2025 will be good for the entire industry with particular emphasis on banking TFI. PKO TFI is part of the strategy of the entire Bank's capital group, according to which we will increase our market share in household savings. Our ambition is a further significant increase in market shares in funds, we are heading in the direction of 25 percent.
We try to be a partner of customers at every stage of their lives and create an offer adequate to their different needs, related to building property for the future. Long -term saving today is one of the most important social needs.
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Author: Maciej Rudke, Business Insider Polska journalist
