THE PROFITABILITY of Portuguese Investment Funds has fallen dramatically in the past three months as a consequence of worldwide market uncertainties.
Also known as Collective Investment Funds, they are a way of investing money with other people to participate in a wider range of investments than those feasible for most individual investors and to share the costs of doing so.
In Portugal such Collective Investment Funds with hundreds of thousands of unit-holders, have seen millions of euros wiped off their values.
Portuguese investment funds that have been most affected is those with portfolios that have strong share components, reflecting the tumbling share markets.
Analysts have warned this past week that those Portuguese who have invested savings in investment funds are facing potentially substantial financial losses.
For example, anyone who had invested in participation (collective) units in national shares can expect to see accumulated losses of around 28.3 per cent since June and 9.43 per cent for September alone.
The majority of Portuguese Investment Funds invested up to two-thirds of savings in national shares issued by Portuguese companies valued in euros.
Anyone who invested 1,000 euros in such a fund in January has lost between 283 euros to 377 euros already.
The situation is a direct reflection of the behaviour and reaction of the Euronext – Bolsa de Valores de Lisboa (Lisbon Stock Market), whose 20 or so key companies have suffered dramatic losses in the past few weeks.
A poor economic year with little growth, the shaky banking system, poor performance of Portuguese companies, especially in construction, and the worsening international financial crisis have all contributed to the collapse in such Investment Funds.
The Lisbon Stock Exchange has suffered accumulated losses of 45 per cent this year so far.
And for those who have invested in PPPs (Retirement Top-Up Pension Plans), the news is looking less than rosy as well with some high-risk-high-return funds crashing 12 per cent for those where 35 per cent or more of savings have been invested in stocks and shares.
However, for those PPPs whereby only five per cent of the total investment portfolio has been invested in shares, things are looking more secure with losses of around two per cent.
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