After the Act on Investment Funds was placed into effect in 1992, the participants of the developing market, the Hungarian investment fund managing companies decided at the end of 1993 to establish the Association of Fund Managing Companies in Hungary with the purpose of representing their mutual interests, preserve the purity of the competition and facilitate the further development of the market.The Association’s primary tasks:* interest conciliation, interest mediation and interest representation* making the investment funds known by developing an adequate PR* collecting information from the Hungarian market* supporting specialized training* establishing relations with similar foreign organizations (associations)* formulating profession recommendations, mutual principles, establishing the regulations of competition ethics.The Association currently consists of 23 investment fund managers of the 28 licensed managers. The Association members are basically all the active Hungarian specialized companies, being that in the area of managed assets the Association’s ratio is 99%.In the past period, the Association placed particular emphasis – due to the quickly developing and changing market environment – on the development of uniform professional standards. In this area, the uniform proposals on matters fundamentally determining the operation of the operation of investment funds were approved. The members utilize the proposals and the supervisory organizations incorporate these in their every day practices.

The proposals effect the following areas:* utilizing derivative productsat the time the Act on Investment Funds was being developed, these markets were not operating in Hungary thus, when they appeared the secure adaptation thereof became necessary (the funds may use these products for hedging purposes).* standardizing the calculation of the net asset valueThis is an extremely important issue in Hungary, being that in the case of certain securities the inadequately liquid markets’ price indexes may divert the investment fund’s net asset value from the true value. Being that the management regulations are built on jointly established principles, it has become possible to compare the performance of the various funds.* the proposal made on the uniform yield calculation, which contains the yield publishing related advertising ethics and investor protection aspects. The purpose of all of the above, is to ensure that the competition on the market is regulated and takes place within a uniform framework and that the investors obtain reliable information on the operation of the investment funds. This can ensure that the investment funds preserve their positive investor rating.

Another important goal in the course of developing the pension scheme is to ensure an increasingly larger role for the investment funds and to achieve, that in the course of modifying the law on the operation of the investment funds, the competitive disadvantage of investment units in Hungary ceases.The Association just reached the point in its development, where besides the voluntary work of the company representatives, further development requires the hiring of permanent employees primarily in the interest of adequate internal and external information/data exchange.Consequences for the investment fund industryIn 2001 the investment fund market grew by 24% in HUF terms.

The growth was driven by the declining inflation and interest rates that made the bond and money market funds attractive. The poor performance of the equity markets also shifted the interest of investors towards bond and money market investments. As a consequence of the appreciation of Forint against Euro and US$ the demand for international diversification has been decreased. The exposure of the domestic funds to securities denominated in foreign currencies is 5 pc.