Risk Ranking of Open-End Investment Funds in the Republic of Croatia

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Srdarevic, Ivana; Kristek, Ivan

Article Risk Ranking of Open-End Investment Funds in the Republic of Croatia

Economic Review: Journal of Economics and Business

Provided in Cooperation with: Faculty of Economics, University of Tuzla

Suggested Citation: Srdarevic, Ivana; Kristek, Ivan (2017) : Risk Ranking of Open-End Investment Funds in the Republic of Croatia, Economic Review: Journal of Economics and Business, ISSN 1512-8962, University of Tuzla, Faculty of Economics, Tuzla, Vol. 15, Iss. 2, pp. 19-33

This Version is available at: http://hdl.handle.net/10419/193873

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RISK RANKING OF OPEN-END INVESTMENT FUNDS IN THE REPUBLIC OF CROATIA 1, Ivan Kristek2

Ivana Srdarević

ABSTRACT measures of statistical dispersion and value at risk will be used. Risk is an unavoidable situation. Both individuals and business entities are exposed to various Keywords: open-end investment funds, risk types of risk on a daily basis. Since business analysis, measuring risk conducts in contemporary market conditions are characterized by an increasingly higher level of JEL: D81 insecurity, business entities have acknowledged the value of risk management. Risk management is a process that entails risk analysis and 1. INTRODUCTION planning. Risk analysis is a central part of the mentioned process that consists of identification, Every action that is taken by an individual risk measurement, and assessment of options. carries certain risk. Risk is a component of life Business entities must identify all financial risks that should be predicted and considered. Danger that their business conduct is exposed to and quantify them in order to control them. During should therefore be understood as a potential risk quantification, it is possible to use several dangeris usually or a the predicament. first association Still, this to view risk andriskon risk methods such as probability analysis, value at is not entirely correct. Risk should be viewed as a risk, and measures of statistical dispersion. After possibility of predicament appearance for which having measured the risk, it is necessary to create the probability of appearing can be estimated. a strategy that will efficiently lower exposure to risks and the amount of their influence on gain a slightly different outcome from a certain business conducts. decisionIn finances, or investmentrisk is perceived than expected, as a possibility therefore to the term risk is not equated with the term danger. Investment funds represent a specific possibility of Even though risk has been the main focus of investing financial resources. These are separate assets controlled by investment fund management of risk has not yet been created. companies and investors participate in income various research, a generally accepted definition return of the overall portfolio fund by purchasing Since businesses entities are continuously exposed shares in investment funds. These funds invest in various financial instruments such as stocks, their business conduct, risk management has been bonds, and financial resources, and the risk of developedto risk, which as acan part have of thean untoward business organizationinfluence on investment funds depends primarily on the type that is in charge of managing risk. Ever increasing of financial instruments in which the fund invests. number of business entities understand the During the purchase of shares in an investment importance of risk management and implement it fund it should be taken into consideration that in their organization. Accordingly, the importance a possible higher income return brings forth a higher level of risk, as in all other types of seen from its standardization trend that resulted investments. The aim of this paper is to quantify inand scopes significance and ofstandards risk management dedicated is to clearly risk risk investment funds that conduct businesses management. The process of risk management in the Republic of Croatia. For this purpose, the is a dynamic one, the one that is continuously

1 Josip Juraj Strossmayer University of Osijek Economic faculty in Osijek, [email protected] 2 Josip Juraj Strossmayer University of Osijek Economic faculty in Osijek, [email protected]

Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 19 /// /// Call for papersI. Kristek

I. Srdarević, by Markowitz and made mostly for long term risk on business conducts. The mentioned process portfolios of the capital market in the USA, is carried out in order to decrease the influence of and measured, the strategy for risk management of investors are the function of expected returns consists of four phases in which risk is identified andbased the on thestandard assumption deviation that efficiencyof these frontiersreturns. is monitored. Since in this paper we are concentrating on the is chosen, and the efficiency of the chosen strategy observation of volatility returns as its measure of risk, we can assume that more successful funds should also be riskier funds. Research proved that Investment funds are quite noticeable on financial high levels of risk in the return of investment funds Investmentmarkets and amongfunds variousattract financialthe attention institutions, of disqualify the variance as an adequate measure individualwhich have investors a role ofby financialoffering their intermediaries. shares in of risk. For example, portfolios with nonlinear funds based on which investors can then have a payments, which have a high Sharpe ratio and share in the portfolio of various bonds with lower high levels of risk (Lucas and Siegmann, 2008), costs. Nevertheless, it should not be forgotten that are easily constructed. Even though researchers each investment carries a certain level of risk and who investigate this topic have ambiguous views investing in investment funds is not an exception. on different measures of risk, in this paper we The level of risk will depend on the type of have opted for a more traditional approach to bonds that the fund invests in. According to the measuring risk, and the methods that are used type of investment, there are equity funds, bond are explained in the following section of the paper. funds, money market funds, and balanced funds. In this paper, the risk of the mentioned funds will be measured by the measures of statistical 3. METHODOLOGY dispersion and value at risk. The aim of this research is to quantify the risk of investment funds. Considering the 2. LITERATURE REVIEW fact that risk is a part of everyday life and that both individuals and business entities Up until today, the most important discovery in attention is demanded. Investment funds are modelling risk in a quantitative way. The value of are exposed to various types of risks, specific thismodern statement financial is hidden theory in is the precisely fact that the if weability know of how to measure and decide the price of risk then becoming ever more significant participants we can correctly estimate risky assets (Copeland investmentson financial marketsin a wide by portfolio trying to oflower bonds the with risk and Weston, 1988). Recent research has proven lowerof investments costs to individual by diversification investors. and Investment offering that funds mostly attract potential investors by funds cannot be adequately observed without emphasizing their success which is substantiated by the accessible historical data. Even though individual types of funds. This research aims prior success of funds does not guarantee future atthe demonstratingquantification ofthe their risk risk of and Undertakings the risk of success, it is presumed that based on prior results for Collective Investment in Transferable initial contact in investment decision making can Securities (UCITS) funds in the Republic of be realized (Ippolitio, 1992). Since the success Croatia by various measures of risk and aims of funds can be connected to the historical data, at mutually comparing the mentioned funds. the risk of funds can also be connected to the The source of secondary data, which is used for historical data of measures of risk. Therefore, the research purposes, is the Croatian Agency the volatility of an accomplished result of funds for Supervision of Financial Services (Neto measured on the basis of historical data can help imovina UCITS fondova, 2017). The research investor in decision making and in presuming the includes 23 equity funds, 7 bond funds, 7 expected volatility in the future. balanced funds and 13 money market funds. For the purpose of comparing UCITS funds, in From the work of Markowitz (1952), the standard this paper we have chosen the funds that have deviation of returns is one of the most known continuously conducted business during a six- measures of risk. The model, which was developed year observation from 2009 until 2014.

/// 20 Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia ///

Risk can be assessed by the measures of from 2009 until 2014 are demonstrated in statistical dispersion. These measures include Table 4.1 as well as the risk assessed by the the range of variation, standard deviation, measures of statistical dispersion. The risk of funds has been assessed by the measures of simplest measure of statistical dispersion is statistical dispersion for 23 observed UCITS thevariance, range and of thevariation coefficient that ofis variation.calculated Theby equity funds in total. The range of variation subtracting the lowest value from the highest for the observed funds is relatively high. The Platinum Blue Chip Fund has the lowest range of variation of annual returns (17%), while the highervalue informative (Karić, 2006). value. Variance,Variance represents standard KD Nova Europa Fund has the highest range of adeviation mean square and coefficientdeviation from of variance the arithmetic have a expressed in the same unit of measure in which period.variation The (69%). Neta KD New Nova Europe Europa Fund achieved achieved the themean values (Vukičević of the results and are Odobašić, shown. Furthermore, 2012). It is thehighest highest return negative of 46.7% returns during of -33.5% the observed during the standard deviation represents an average the observed period and it also has the second deviation from the arithmetic and it is the highest range of variation of 57.8%. Even most commonly used measure of statistical though initially it might seem that equity funds dispersion in practice. It is expressed in the achieve high returns, average returns are same unit of measure in which the values of the low. The reason therefore is the fact that the observed equity funds have also achieved high also one of the measures of statistical dispersion negative returns in addition to high positive results are shown. The coefficient of variation is returns. Furthermore, the calculated standard of variation is a relative measure of statistical deviation for UCITS equity funds is within the dispersionthat is used and while represents measuring a percentage risk. Coefficient of the standard deviation in relation to the value of has the lowest standard deviation while the KD Novarange Europaof 5.66% Fund to 26.19%. has the Platinum highest Bluestandard Chip 2012). deviation. Seven out of the overall 23 observed the arithmetic mean (Vukičević and Odobašić, UCITS equity funds have the standard deviation that is lower than 10%, while 12 have the risk is the value at risk (VaR) method. VaR shows standard deviation that is within the range of theOne highest of the most possible acceptable value methodsof loss, hence, for measuring it states the most that can be lost in a certain period. Value funds have the standard deviation that is higher at risk is a statistical measure that assesses future than10% 20%,to 20%. and Only these four funds of theare observedFima Equity, equity KD risk of certain assets or an entire portfolio and Victoria, KD Nova Europa and Neta New Europe. intends to reduce the entire risk of a portfolio UCITS equity funds is exceptionally high, whichThe coefficient means that of the variation mentioned for funds the observed have an to a single figure (Aljinović, Marasović and Šego, exceptionally high variability of returns. If the 2011). VaR is defined by two parameters, the level variability of returns is high, then the risk of isof confidence95% or 99%. and VaR the candefined easily period. be incorporated The level of investment is also higher. Since all the analysed andconfidence, interpreted which in is reportsusually usedthat forare calculating,presented to management, regulators, investors or wider higher than 70%, the variability of their returns isequity very high, funds which have also a coefficient connotes a of substantial variation risk of investment. Thus, the measures of public (Novak and Sajter, 2007). statistical dispersion demonstrate that UCITS 4 RESULTS AND DISCUSSION equity funds are very risky.

4.1. Assessing risk by measures Table 4.2 demonstrates the annual historical of statistical dispersion returns of UCITS bond funds for the observed period and the risk measured by the measures There are 50 UCITS funds that are monitored of statistical dispersion. The risk of funds was and mutually compared. The annual historical calculated for seven observed UCITS bond funds returns of UCITS equity funds for the period

by five measures of statistical dispersion, which Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 21 /// /// Call for papersI. Kristek

I. Srdarević, 494.89 286.07 144.31 256.70 510.95 295.48 122.23 483.08 195.03 133.26 287.42 194.47 474.30 106.65 294.06 242.22 -589.80 -427.81 -957.45 -643.28 -2130.31 -4469.69 variation -15351.00 Coefficient of Coefficient 8.71 8.51 9.30 6.85 9.62 5.66 9.26 14.52 14.49 20.42 15.98 14.36 26.19 11.43 21.75 11.44 10.95 22.31 10.26 18.35 11.03 18.92 14.56 Standard Standard deviation 75.85 72.50 86.43 46.95 92.55 32.07 85.80 12000 10530 210.74 210.09 417.02 255.28 206.26 686.16 130.65 472.94 130.94 497.79 336.61 121.56 357.80 211.91 Variance 2.9 5.1 5.9 3.6 5.1 3.9 9.4 1.4 5.6 2.0 6.4 5.3 9.7 3.2 7.7 6.0 -1.5 -4.8 -0.8 -1.5 -0.1 -3.5 -0.2 yield Average Average 23.6 34.0 45.3 51.7 23.7 23.6 39.2 43.1 69.0 30.1 55.0 33.4 18.9 57.8 31.3 31.3 57.0 27.8 17.0 50.7 25.4 26.0 39.5 range Variation Variation 5.0 9.2 5.0 6.4 9.3 1.4 1.5 2.4 5.0 -0.4 -1.0 16.1 27.1 27.5 15.3 11.8 12.9 25.1 15.2 11.6 12.9 -15.5 -12.5 2014 5.9 1.6 4.8 9.2 2.1 3.8 7.6 4.1 1.0 5.4 7.2 3.4 -0.7 13.4 17.2 28.7 10.3 15.3 13.3 -12.3 -10.5 -11.2 -18.6 2013 5.0 6.4 0.3 1.1 3.2 6.3 3.3 0.3 1.3 3.1 2.7 9.5 5.3 7.2 -3.3 10.5 17.0 10.2 12.7 24.3 15.2 10.3 -24.3 2012 -8.4 -5.3 -8.2 -7.1 -3.6 -5.0 -15.2 -17.7 -18.2 -11.7 -27.6 -30.1 -22.2 -17.3 -17.9 -33.5 -11.3 -18.4 -22.0 -16.2 -21.7 -22.2 -15.1 2011 7.8 3.5 4.5 0.9 2.8 7.2 3.5 7.1 5.5 2.7 7.0 -0.3 -1.2 -7.6 -8.1 -0.5 15.5 16.0 12.8 25.3 32.3 11.6 -16.1 2010 2.5 7.1 5.2 9.1 2.5 3.0 3.8 4.4 8.3 18.8 13.8 16.0 46.7 13.8 18.6 24.2 11.6 35.3 13.5 17.3 21.0 -17.4 -29.9 2009 Year A1 Adriatic Equity Equity Adriatic Capital Two Fima Equity HI Growth HPB Dionički Azijski tigar Ilirika Ilirika Europa Ilirika Europa KD Nova KD Prvi izbor KD Victoria Neta Frontier Neta Global Developed Neta New Europe Neta US Algorithm ZB Trend PBZ Equity PBZ OTP Indeksni OTP Meridijan 20 OTP Platinum Blue Chip Platinum Global Opportunity ZB Euroaktiv ZB Aktiv Table 4.1: Benchmark dispersion of UCITS equity funds 4.1: Benchmark Table

/// 22 Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia /// is shown in Table 4.2. Bond funds achieved accomplished by the Raiffeisen Cash Fund. The lower annual returns in comparison to equity range of variation of money market funds is funds. Nevertheless, their returns were more stable, therefore the range of variation was of equity and bond funds. The average returns lower in comparison to equity funds. Among aresignificantly within the lower range than of 1.7%the range to 4.5%. of variation Locusta bond funds, the highest annual return of 12.3% Cash has the highest average return while PBZ was achieved by the Raiffeisen Bond Fund in Dollar has the lowest. The standard deviation of 2009, while the lowest annual return of -13.8% money market funds is also outstandingly lower was achieved by the PBZ Bond Fund in 2012. than the same measures of equity and bond funds. The standard deviation of money market accomplished a positive annual return during Out of seven observed bond funds, only one Fund, which has the lowest range of variation of offunds variation is within lower the than range 100%, of 0.46% unlike to 3.13%.equity the observed years, and that is the Capital One andAll moneybond funds market that funds have haveexceptionally a coefficient high

In6.8%. contrast, PBZ Bond has the highest range of variation of 22.5%. When taking the average 13.77%,coefficients which of variation. means that The theAgram variability Euro Cash of return into consideration, only one bond fund returnFund has of the lowestfund is coefficient relatively oflow. variation From the of achieved a negative average return of -2.1%, observed 13 UCITS money market funds, two namely the Neta Emerging Bond Fund, while range of 30% to 50% and the variability of their from 2009 to 2014 was achieved by the Capital funds have the mentioned coefficient within the the highest average return of 6.8% in the period funds is within the range of 2.28% to 8.72% ofreturns 50% isto relatively70% and low, relatively while fivehigh other variability funds andOne consequently Fund. The standard the annual deviation returns ofof these bond have a coefficient of variability within the range funds differ slightly from the average annual return. In comparison to the equity funds, bond of returns.variation Also, higher five thanmoney 70%, market which funds implies from thatthe overall the variability 13 observed of their funds returns have isa coefficient very high. funds have a significantly lower coefficient of thanvariation. 70%, Regardless, which implies the coefficient that the ofvariability variation The ZB Plus Fund has the highest coefficient of for 6 out of 7 observed equity funds is higher Thevariation annual of 98.61%.returns of UCITS balanced funds Fund is once more emphasized since it has for the observed period and the risk assessed of returns is very high. Here the Capital One by the measures of statistical dispersion are variability of its annual returns is moderate. demonstrated in Table 4.4, from which the the coefficient of variation of 45.98% and the annual returns of the observed seven UCITS Table 4.3 demonstrates annual historical balanced funds can be seen as well as the returns of the observed UCITS money market calculated measures of statistical dispersion. funds for the period from 2009 to 2014 and The achieved returns of balanced funds are the risk assessed by measures of statistical higher than the returns of money market and dispersion. From Table 4.3 it can easily be noticed bond funds, and are similar to the returns of that the measures of statistical dispersion for equity funds. Also, what needs to be taken into money market UCITS funds are outstandingly account is the fact that the returns of equity and different from the same measures for equity and bond funds. It must be emphasized that none of which is especially true for equity funds. When the overall 13 observed money market funds takingbalanced UCITS funds balanced have had funds significant into consideration, oscillation, accomplished a negative annual return in the the lowest return of -28.7% was achieved by ICF period from 2009 to 2014. All money market Balanced, while the highest return of 20% was funds, apart from Agram Euro Cash, achieved the highest return during the observed period taking the range of variation into consideration, in 2009. PBZ Dollar accomplished the lowest balancedachieved byfunds the have OTP aUravnoteženi higher range Fund. of variation When annual return of 0.3% in the observed period, than bond and money market funds, but a lower while the highest annual return of 9.5% was range than equity funds.

Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 23 /// /// Call for papersI. Kristek

I. Srdarević, 92.92 82.11 45.98 13.77 70.05 83.55 63.85 57.06 59.27 67.32 91.46 42.70 69.90 89.99 98.61 48.25 105.37 279.41 738.16 -425.48 Coefficient Coefficient Coefficient of variation of variation 5.11 7.50 8.72 4.42 3.31 8.40 2.82 0.46 2.16 2.74 1.84 2.54 1.88 1.85 2.84 1.30 1.18 3.13 2.96 1.05 Standard Standard Standard deviation deviation 7.95 0.21 4.65 7.53 3.39 6.47 3.52 3.43 8.06 1.70 1.40 9.83 8.75 1.11 26.12 56.21 76.08 19.56 10.97 70.61 Variance Variance 4.9 2.7 6.1 3.4 4.8 4.0 1.1 3.1 3.3 2.9 4.5 3.2 2.8 3.1 3.1 1.7 3.5 3.0 2.2 -2.1 yield yield Average Average Average 6.8 1.4 7.9 6.0 7.6 5.1 7.0 5.1 5.1 7.8 3.5 3.3 8.4 8.1 2.9 14.7 19.2 21.4 22.5 11.3 range range Variation Variation Variation 7.2 5.9 6.4 2.7 7.3 9.5 8.7 8.3 1.0 0.8 1.4 2.3 1.8 1.1 0.8 1.5 1.4 1.1 0.7 1.0 2014 2014 3.1 3.5 5.9 1.4 1.3 1.8 2.6 2.3 1.0 1.2 2.0 0.3 1.1 1.0 1.2 -3.6 -4.4 -2.0 -1.1 -11.9 2013 2013 7.5 7.5 4.1 5.5 0.9 3.1 2.8 2.3 4.0 3.2 3.0 3.1 3.5 1.2 2.6 2.7 2.5 -6.9 10.2 -13.8 2012 2012 2.1 0.8 2.3 3.1 0.7 0.4 2.4 2.5 2.8 3.9 1.6 2.5 2.1 2.5 1.2 2.7 2.5 2.0 -0.6 -10.4 2011 2011 4.8 8.4 9.1 3.5 5.8 7.7 5.5 4.3 3.7 3.9 2.5 4.6 3.4 2.8 2.9 3.8 2.6 3.9 2.3 2.5 2010 2010 8.4 3.2 0.3 5.6 6.5 7.0 8.4 6.5 9.3 6.7 6.1 8.6 5.0 3.6 9.5 8.8 3.9 -5.9 11.1 12.3 2009 2009 Year Year ZB Bond Raiffeisen Bonds Raiffeisen Capital One Cash Euro Agram HI Conservative Bond Neta Emerging Bond PBZ HPB Obveznički Money Erste HPB Novčani HI Cash Locusta Cash Money One Money OTP Novčani OTP PBZ Novčani PBZ PBZ Euronovčani PBZ PBZ Dollar PBZ Raiffeisen Cash Raiffeisen ZB Plus ZB Europlus Table 4.2: Benchmark dispersion of UCITS bond funds 4.2: Benchmark Table Table 4.3: Benchmark dispersion of UCITS cash funds 4.3: Benchmark Table

/// 24 Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia /// 268.87 336.04 475.30 250.43 119.68 -212.81 -816.69 Coefficient Coefficient of variation 0.5 – 3.1 0.2 – 9.8 1.4 – 8.4 13.8 – 98.6 Cash funds 9.77 8.03 7.75 6.44 12.60 14.14 10.81 Standard Standard deviation 95.43 64.50 60.14 41.51 158.64 199.97 116.80 Variance 3.6 2.7 2.4 3.1 5.4 -6.6 -1.3 2.8 – 8.7 yield 8.0 – 76.1 6.8 – 22.5 Bond funs Average Average -425.5 – 738.2 28.1 36.5 22.0 40.8 23.0 25.1 18.1 range Variation Variation 7.0 4.4 6.9 12.2 12.1 12.5 12.6 2014 The ranges of movement (%) of movement The ranges 6.4 – 14.1 18.1 – 40.8 41.5 – 200.0 -816.7 – 475.3 Balanced funds Balanced 0.1 0.6 9.8 4.3 3.7 -3.6 -11.3 2013 7.4 3.7 3.9 5.1 5.5 -2.2 -12.6 2012 -9.8 -3.8 -7.9 -5.5 -14.2 -16.5 -11.1 2011 5.7 – 26.2 17.0 – 69.0 32.1 – 686.2 Equity fund Equity -15,351.0 – 510.9 7.6 4.0 1.5 4.8 -5.7 -8.2 -11.9 2010 9.6 13.9 20.0 11.9 11.8 11.2 -28.7 2009 Measure Year ZB Global PBZ Global PBZ ICF Balanced Uravnoteženi OTP KD Balanced HPB Global HI Balanced Coefficient of variation Coefficient Standard deviation Standard Variance Variation range Variation Table 4.4: Benchmark dispersion of UCITS balanced funds 4.4: Benchmark Table the types of UCITS funds of scale dispersions by 4.5: The ranges Table

Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 25 /// /// Call for papersI. Kristek

I. Srdarević, The HI Balanced Fund has the lowest range of observed types of UCITS funds. The range of variation of 18.1% in balanced funds but also variation is highest in equity funds and the has the highest average return of 5.4%. The ICF lowest in money market funds. The same can be Balanced Fund has the highest range of variation determined for variance, standard deviation and of 40.8% but also the lowest average return of to the measures of statistical dispersion, equity two funds have a negative average return. The fundsthe coefficient are the of riskiest, variation. followed Therefore, by accordingbalanced standard-6.6%. Out deviation of seven of observed balanced balancedfunds is within funds, funds. In contrast, bond funds are less risky, while the least risky are money market funds. a higher standard deviation than bond funds andthe range money of market6.44% tofunds, 14.14%. but Thesea lower funds standard have deviation than equity funds. The situation is 4.2. Value at Risk

The following measure of risk used for balancedsimilar with funds the is coefficient higher than of variation.70%, which The comparing the chosen funds is value at risk impliesmentioned that coefficient the variability of all of sevenreturns mentioned of UCITS (VaR). Based on the data of annual historical balanced funds is quite high. returns for the analysed period, a six-year VaR of equity funds with a 95% or 99% level of Table 4.5 demonstrates the range of calculated is calculated and shown in Table measures of statistical dispersion for all confidence 4.6.

Table 4.6: VaR for UCITSEquity equity Fund funds VaR (95%) VaR (99%)

A1 -21.02 -30.89 Adriatic Equity -15.85 -21.77 Capital Two -18.85 -28.71 Fima Equity -38.47 -52.35 HI Growth -8.15 -13.94 -11.72 -18.04 -27.11 -37.98 HPB Dionički Ilirika Europa -25.20 IlirikaAzijskitiger KD Nova Europa -38.09 -55.91 -34.96 KD Prviizbor -14.99 KD Victoria -50.81 -22.76 Neta Frontier -9.52 -17.30 -36.02 Neta Global Developed -9.89 -14.55 Neta US Algorithm -21.48 -34.35 -13.85 -20.39 -23.89 OTP Indeksni PBZ Equity -18.44 -25.94 OTP Meridijan 20 -36.37 Platinum Blue Chip -4.03 -7.88 -18.01 -27.91 ZB Aktiv -12.13 -18.43 Platinum Global Opportunity ZB Euroaktiv -9.23 ZB Trend -19.91 -16.21 -12.46 ///

26 Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia ///

lower than the VaR of the previously observed consideration, out of 23 observed equity funds, When taking a 95% level of confidence into from the overall seven observed bond funds The Platinum Blue Chip Fund has the lowest VaR onlyequity two funds. funds With have a 95%VaR that level is of higher confidence, than only five equity funds have VaR lower than 10%. 10%, while the rest have VaR lower than 10%. equity funds have VaR within the range of 10% The lowest VaR with the mentioned level of of 4.03% with a 95% level of confidence. Nine Fund (1.48%) and HI Conservative (1.43%), haveto 20%, VaR whilewithin five the fundsrange haveof 30% VaR to within40%. The the confidence was registered for the Capital One onlyrange observed of 20% toequity 30%. fund Only that three has equity VaR higher funds Neta Emerging Bond Fund. When taking a 99% than 40% is the Neta New Europe Fund , its VaR while the highest VaR of 16.44% belongs to the all seven observed bond funds only four have VaRlevel lower of confidence than 10%, into and consideration,three funds have out VaR of onlyis 40.28% one equity with funda 95% has level VaR oflower confidence. than 10% When and higher than 10%, leaving only one fund (Neta thattaking is athe 99% Platinum level of Blue confidence Chip Fund. into Its account, VaR is Emerging Bond) with VaR higher than 20%. 7.88%. The KD Nova Europa Fund has the highest Table 4.8. demonstrates the VaR of UCITS money market funds and it is clear that the TableVaR of 55.91%4.7 demonstrates with a 99% levelVaR ofof confidence. UCITS bond VaR of the observed funds is very low. With a funds. Clearly, VaR of bond funds is significantly 95% level of confidence, none of the observed Table 4.7: VaR for UCITS bond funds Bond fund VaR (95%) VaR (99%) 1.48 -0.44 -2.54 -5.55 Capital One HI Conservative -1.43 HPB Obveznički Neta Emerging Bond -22.37 -3.68 PBZ Bond -12.73 -18.44 -16.44 Raiffeisen Bonds -14.79 ZB Bond -3.58 -9.69 -7.06 Table 4.8: VaR for UCITS cash funds Cash fund VaR (95%) VaR (99%) Agram Euro Cash 2.59 2.28 Erste Money -0.48 -1.95 -1.24 -3.11 HI Cash -0.15 -1.41 HPB Novčani Locusta Cash -1.47 0.07 -1.21 0.26 -0.30 Money One -1.58 -3.51 OTP Novčani -1.56 0.90 0.02 PBZ Novčani PBZ Dollar PBZ Euronovčani Raiffeisen Cash -3.82 -0.26 -1.06 ZB Plus -1.88 -3.89 -1.69 ZB Europlus 0.45 -0.27

Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 27 /// /// Call for papersI. Kristek

I. Srdarević, Table 4.9: VaR for UCITS balanced funds Balanced fund VaR (95%) VaR (99%) HPB Global

HI Balanced -19.16-5.25 -26.50 KD Balanced -9.70 -14.97-9.63 ICF Balanced -29.98 -39.59 -18.13

PBZOTP GlobalUravnoteženi -26.70 ZB Global -12.49-10.86 -19.13-16.32 money market funds have VaR higher than 3%, Fund. Its VaR is 29.98%. The HI Balanced Fund has the lowest VaR of 5.25% with a 95% level of funds have VaR higher than 4%. When taking a and with a 99% level of confidence, none of the 99%, out of seven observed balanced funds, money market funds eight have VaR lower than onlyconfidence. one fund With has theVaR levellower of than confidence 10%, and being that 95% level of confidence into account, out of 13 balanced funds have VaR within the range of 1%, however with a 99% level of confidence, 10%is the to HI 20%, Balanced and two fund. balanced Its VaR isfunds 9.63%. have Three VaR Tableonly five 4.9 funds demonstrates have VaR higher the thanVaR 2%.of UCITS within the range of 20% to 30%. ICF Balanced balanced funds. The same funds have higher has the highest VaR of 39.59% with a 99% level VaR than money market and bond funds, but lower VaR than equity funds. With a 95% level Figureof confidence. 4.1 shows the average VaR for a 95% funds, only two funds have VaR lower than 10%, whileof confidence four of them out ofhave seven VaR observedwithin the balanced range of type of UCITS funds. Clearly, the highest VaR on averageand 99% belongs level of to confidenceUCITS equity according funds. They to theare higher than 20%, and that is the ICF Balanced followed by mixed funds that on average have 10% to 20%. Only one balanced fund has VaR

0 Cash funds Equity funds Balanced funds Bond funds

VaR (95%) VaR (99%)

Figure 4.1: Average VaR by type of UCITS fund

4.3./// Variance28 - covariance Economic matrix Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017

Covariance is used as a measure of the relationship between variables. Covariance is a measure of degree that shows the extent of two variables varying together over time (Vukičević and Odobašić, 2012). If the covariance if positive, the variables tend to vary together in the same direction, if it is negative, the variables vary in the opposite direction. The covariance can also bezero, which means that there is no relationship between the two variables. Variance-covariance matrix will be used in order to demonstrate the relationship between investment funds. The matrix was combined in such a way that the values of fund variances have been put diagonally while the rest of the fields in the matrix have been fulfilled with the values of covariance between investment funds.

Table 4.10 demonstrates the variance-covariance matrix for the observed UCITS equity funds. The positive covariance is prevalent, which implies that the returns of each of the equity funds have a tendency of varying together in the same direction. Clearly, it is not a common rule for all observed funds since certain funds have a negative covariance. Fima Equity has the most negative values in covariance, which means that the returns of the mentioned fund are varying in the opposite direction from the returns of the funds with a negative covariance ( for example KD Nova Europa, Neta New Europe, ZB Euroaktiv, ZB Trend, etc.). When taking the size of value of covariance between equity funds into consideration, the values range up to 100%, but certain funds have outstandingly higher covariance. Such examples are the funds KD Nova Europa, Neta New Europe and Platinum Global Opportunity. Their values of covariance exceed 100%. Among the observed equity funds, the lowest positive covariance of 1.09% exists between the funds A1 and Neta US

Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia ///

Europa and Fima Equity have the highest negative covariance of -275.74%. VaR of 15.08% for a 95% level of confidence moneyand 21.84% market for fundsa 99% havelevel ofthe confidence. lowest average Bond Table 4.11 demonstrates the variance-covariance VaR.funds Thus, have according the average to the VaR VaR of 6.42%.as a measure UCITS matrix for the observed UCITS bond funds. The of risk, equity funds are the riskiest, followed variance-covariance matrix of UCITS bond funds shows that among the observed funds positive money market funds, which are the least risky. values of covariance prevail. Nevertheless, when by balanced funds, then bond funds and finally compared to equity funds, the values of covariance 4.3. Variance-covariance matrix with bond funds are considerably lower. PBZ Bond and Raiffeisen Bonds have the highest positive Covariance is used as a measure of the value of covariance of 45.12%. relationship between variables. Covariance is a measure of degree that shows the extent of two HI Conservative and Raiffeisen Bonds have the

The Neta Emerging Bond Fund is emphasized in thevariables variables varying tend togetherto vary together over time in (Vukičevićthe same thehighest variance-covariance negative value ofmatrix covariance due to of being -5.64%. the direction,and Odobašić, if it is 2012). negative, If the the covariance variables varyif positive, in the only out of all seven observed bond funds that opposite direction. The covariance can also bezero, has a double-digit covariance towards all other which means that there is no relationship between funds within the range of 13.74% to 23.33%. In the two variables. Variance-covariance matrix will the group of bond funds HI Conservative has the be used in order to demonstrate the relationship most negative values of covariance, the returns of between investment funds. The matrix was thisfund are varying in opposite direction from combined in such a way that the values of fund the returns of PBZ Bond, Raiffeisen Bonds and ZB variances have been put diagonally while the rest Bond funds. the values of covariance between investment funds. Table 4.12 demonstrates the variance-covariance of the fields in the matrix have been fulfilled with matrix for the observed UCITS money market Table 4.10 demonstrates the variance-covariance funds. It can clearly be seen that the values of their matrix for the observed UCITS equity funds. The covariance are lower in comparison to the covariance positive covariance is prevalent, which implies of equity and bond funds. The value of covariance of that the returns of each of the equity funds have a tendency of varying together in the same to 7.59%. Therefore, a negative covariance, which is direction. Clearly, it is not a common rule for all considerablymoney market low, funds exists is withinonly in thetwo range cases, of between -0.06% observed funds since certain funds have a negative the covariance of the funds Agram Euro Cash and HI covariance. Fima Equity has the most negative Cash of -0.03%, and between the funds Agram Euro values in covariance, which means that the returns of the mentioned fund are varying in the opposite direction from the returns of the funds Cash and PBZ Dollar of -0.06%. with a negative covariance (for example KD Nova investment funds, the variance-covariance matrix Europa, Neta New Europe, ZB Euroaktiv, ZB Trend, forUnlike money the marketfirst two funds matrices entails for positive equity and values bond of etc.). When taking the size of value of covariance covariance, which means that the returns of bond between equity funds into consideration, the funds have a tendency of varying together in the values range up to 100%, but certain funds have same direction. However, since the values are outstandingly higher covariance. Such examples relatively small, the mentioned tendency is very are the funds KD Nova Europa, Neta New Europe low. The funds Raiffeisen Cash and ZB Plus have the highest positive covariance of 7.59%. covariance exceed 100%. Among the observed equityand Platinum funds, Globalthe lowest Opportunity. positive Their covariance values of The variance-covariance matrix of UCITS observed 1.09% exists between the funds A1 and Neta US balanced funds can be seen in table 4.13. The Algorithm, while the highest positive covariance values of covariance for balanced funds are higher of 424.98% exists between the funds KD Nova than the values of covariance for money market Europa and Neta New Europe. The funds KD Nova and bond funds. Even though initially the variance-

Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 29 /// /// Call for papersI. Kristek

I. Srdarević, ZB Trend ZB

42.88 21.89 39.82 41.54 51.41 48.24 84.27 64.67 51.15 36.46 65.04 89.33 63.92 72.66

37.17 80.09 69.55 -58.79 120.00 213.90 129.25 147.97 -101.33 ZB Euro. ZB

35.75 32.88 38.02 48.72 53.33 41.39 85.47 16.20 65.04 45.33 27.47 76.23 30.78 60.29 16.21 31.50 52.40 -26.16 -58.17 170.62 142.49 105.30 140.72 ZB Aktiv ZB

-9.65 52.19 42.87 53.14 28.60 85.80 34.32 99.16 65.17 51.41 47.10 79.12 79.13 53.33 85.05 67.75 80.84 79.14 133.00 107.58 142.87 102.87 110.73 Plat. G.O. Plat.

91.51 78.58 80.74 99.16 56.58 86.82 84.27 86.33 85.47 70.63 102.28 211.91 159.70 124.31 104.96 163.61 154.48 148.74 108.07 132.85 135.75 108.48 187.88 Plat. B.C. Plat.

26.29 19.88 28.62 25.84 56.58 34.32 32.07 35.15 27.17 32.07 48.24 55.58 75.40 45.19 42.82 41.39 26.22 43.42 36.30 83.65 -23.24 -20.27 105.07 PBZ Equity PBZ

71.67 56.68 72.97 44.34 79.12 35.15 88.40 97.67 81.33 51.15 53.58 76.31 45.33 98.23 124.31 121.56 128.06 107.19 126.36 110.57 121.52 129.13 117.27 OTP M20 OTP

97.89 68.84 93.31 83.65 98.13 82.79 85.78 96.79 -59.43 -48.29 104.22 187.88 110.73 117.27 147.97 179.63 335.95 256.85 131.98 140.72 130.71 145.95 336.61 OTP Ind. OTP

8.45

-3.98 52.54 42.67 59.21 39.52 67.75 76.31 42.82 72.66 92.55 68.70 70.04 60.29 72.28 98.63 68.68 108.07 104.88 109.34 152.89 125.76 131.98 Neta US Neta

1.09

48.79 68.76 12.20 85.05 45.19 63.92 51.29 41.58 30.78 98.13 101.45 148.74 110.57 100.01 125.04 357.80 104.88 121.53 126.71 113.23 151.28 143.29 Neta N.E. Neta

59.42 89.86 53.90 44.09 41.58 75.40

-48.51 142.87 154.48 126.36 129.25 424.98 497.79 125.76 127.66 106.78 142.49 200.31 101.37 182.58 196.62 256.85 -204.43 Neta G.D. Neta

47.78 40.03 46.95 35.13 42.87 78.58 56.68 21.89 54.34 35.09 53.90 75.45 68.76 42.67 49.30 31.26 19.88 32.88 41.39 63.79 54.28 69.20 68.84

Frontier Neta

7.46 5.04

51.53 51.09 31.26 65.17 86.82 81.33 64.67 10.19 70.04 91.58 32.07 16.20 79.10 85.78 128.68 106.78 126.71 130.94 101.22 146.16 110.40 KD Victoria KD

8.45 6.80 72.99 43.78 12.42 75.45 47.10 86.33 10.19 88.40 56.96 63.79

-48.51 -23.24 -26.16 -59.43 244.84 472.94 125.04 103.59 137.69 -248.38 -101.33 KD P.I. KD

87,.3

62.52 59.96 15.12 49.30 79.13 32.81 89.57 68.70 91.58 97.67 27.17 27.47 36.46 82.79 104.96 141.20 121.82 127.66 103.59 121.53 130.65 119.60 KD N.E. KD

55.86 87.26 65.30 35.09 51.29 89.57 58.61

133.00 686.16 159.70 152.89 128.68 107.19 105.07 170.62 213.90 197.99 180.09 199.51 424.98 335.95 -275.74 -248.38 Ilirika E. Ilirika

91.31 90.15 57.43 69.20 55.58 76.23 89.33 21.32 63.79 109.34 107.58 199.51 163.61 143.29 121.82 110.40 128.06 129.39 140.59 168.49 206.26 196.62 179.63 Ilirika A.T. Ilirika

78.52 86.93 23.40 54.28 98.63 43.42 31.50 80.09 19.62 56.96 102.87 180.09 135.75 151.28 141.20 146.16 129.13 142.75 165.24 255.28 168.49 182.58 130.71 HPB Dion. HPB

7.46

45.69 49.47 86.43 35.13 39.52 28.60 65.30 80.74 12.20 15.12 44.34 25.84 48.72 41.54 63.02 59.49 50.93 23.40 57.43 44.09 12.42 104.22 HI Growth HI

52.49 72.50 49.47 40.03 52.54 52.19 87.26 91.51 48.79 59.96 51.09 71.67 26.29 35.75 42.88 49.92 89.45 92.19 86.93 90.15 89.86 97.89 43.78

Equity

Fima Fima 5.04 -3.98 -9.65 -6.30 72.95 49.92 63.02 54.34 70.63 32.81 53.58 19.62 21.32

-20.27 -58.17 -58.79 -48.29 100.01 417.02 125.51 244.84 -275.74 -204.43 Capital 2 Capital

84.16 92.19 50.93 63.79 72.28 26.22 80.84 16.21 37.17 58.61 96.79

132.85 113.23 119.60 101.22 121.52 125.51 131.29 210.09 165.24 140.59 101.37 137.69

Equity Adriatic

75.85 52.49 45.69 62.52 51.53 47.78 59.21 72.97 28.62 53.14 38.02 39.82 72.95 52.69 84.16 78.52 91.31 55.86 59.42 93.31 72.99 102.28 101.45 A1

6.80 1.09

-6.30 52.69 89.45 59.49 87.63 79.10 41.39 68.68 98.23 36.30 79.14 52.40 69.55 210.74 131.29 142.75 129.39 197.99 200.31 145.95 108.48 Fund

A1 Adriatic Equity Capital 2 Fima Equity HI Growth HPB Dion. Ilirika A.T. Ilirika E. KD N.E. KD P.I. KD Victoria Neta Frontier Neta G.D. Neta N.E. Neta US Ind. OTP M20 OTP E. PBZ Plat. B.C. Plat.G.O. ZB Ak. ZB Euro. ZB Trend Table 4.10: The matrix of variance and covariance of the observed equity funds of the observed and covariance 4.10: The matrix of variance Table

/// 30 Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017

Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia /// ZB Trend ZB 42.88 21.89 39.82 41.54 51.41 48.24 84.27 64.67 51.15 36.46 65.04 89.33 63.92 72.66 37.17 80.09 69.55 -58.79 120.00 213.90 129.25 147.97 -101.33

1.11 2.40 2.58 0.86 1.12 2.36 1.59 1.48 2.12 1.46 2.31 1.86 0.12 ZB Euro. ZB 9.07 5.52

ZB Europlus -2.48 15.78 19.37 17.84 26.12

35.75 32.88 38.02 48.72 53.33 41.39 85.47 16.20 65.04 45.33 27.47 76.23 30.78 60.29 16.21 31.50 52.40 -26.16 -58.17 170.62 142.49 105.30 140.72 ZB Aktiv ZB ZB Bond

2.40 8.75 7.59 2.35 2.78 6.95 4.46 4.33 6.20 4.51 6.59 5.13 0.03 -9.65 52.19 42.87 53.14 28.60 85.80 34.32 99.16 65.17 51.41 47.10 79.12 79.13 53.33 85.05 67.75 80.84 79.14

133.00 107.58 142.87 102.87 110.73 ZB Plus Plat. G.O. Plat.

91.51 78.58 80.74 99.16 56.58 86.82 84.27 86.33 85.47 70.63

102.28 211.91 159.70 124.31 104.96 163.61 154.48 148.74 108.07 132.85 135.75 108.48 187.88 Plat. B.C. Plat. 9.20 3.83 2.58 7.59 9.83 2.76 3.06 7.31 4.71 4.65 6.63 4.72 7.14 5.55 0.00 -5.64 16.78 45.12 56.21 17.84

26.29 19.88 28.62 25.84 56.58 34.32 32.07 35.15 27.17 32.07 48.24 55.58 75.40 45.19 42.82 41.39 26.22 43.42 36.30 83.65

-23.24 -20.27 105.07 Raiffeisen Cash PBZ Equity PBZ Raiffeisen Bonds 71.67 56.68 72.97 44.34 79.12 35.15 88.40 97.67 81.33 51.15 53.58 76.31 45.33 98.23 124.31 121.56 128.06 107.19 126.36 110.57 121.52 129.13 117.27

0.86 2.35 2.76 1.40 1.06 2.32 1.54 1.54 2.17 1.45 2.38 1.86 -0.06 OTP M20 OTP PBZ PBZ Dollar

97.89 68.84 93.31 83.65 98.13 82.79 85.78 96.79

-59.43 -48.29 104.22 187.88 110.73 117.27 147.97 179.63 335.95 256.85 131.98 140.72 130.71 145.95 336.61 OTP Ind. OTP 3.69 5.52 -4.92 -1.05 18.31 70.61 45.12 8.45 -3.98 52.54 42.67 59.21 39.52 67.75 76.31 42.82 72.66 92.55 68.70 70.04 60.29 72.28 98.63 68.68 108.07 104.88 109.34 152.89 125.76 131.98

1.12 2.78 3.06 1.06 1.70 2.80 1.89 1.84 2.51 1.67 2.77 2.25 0.20 Neta US Neta PBZ Bond PBZ

1.09

48.79 68.76 12.20 85.05 45.19 63.92 51.29 41.58 30.78 98.13 PBZ PBZ Euronovčani 101.45 148.74 110.57 100.01 125.04 357.80 104.88 121.53 126.71 113.23 151.28 143.29 Neta N.E. Neta 59.42 89.86 53.90 44.09 41.58 75.40 -48.51 142.87 154.48 126.36 129.25 424.98 497.79 125.76 127.66 106.78 142.49 200.31 101.37 182.58 196.62 256.85

-204.43

2.36 6.95 7.31 2.32 2.80 8.06 4.30 4.29 5.97 4.27 6.40 5.01 0.11 Neta G.D. Neta PBZ PBZ Novčani

47.78 40.03 46.95 35.13 42.87 78.58 56.68 21.89 54.34 35.09 53.90 75.45 68.76 42.67 49.30 31.26 19.88 32.88 41.39 63.79 54.28 69.20 68.84 13.74 23.33 15.03 76.08 18.31 16.78 19.37

Frontier Neta 1.59 4.46 4.71 1.54 1.89 4.30 3.43 2.67 3.86 2.72 4.14 3.28 0.10 7.46 5.04 51.53 51.09 31.26 65.17 86.82 81.33 64.67 10.19 70.04 91.58 32.07 16.20 79.10 85.78

128.68 106.78 126.71 130.94 101.22 146.16 110.40

Neta Emerging Bond Neta Emerging OTP OTP Novčani KD Victoria KD

8.45 6.80 72.99 43.78 12.42 75.45 47.10 86.33 10.19 88.40 56.96 63.79

-48.51 -23.24 -26.16 -59.43 244.84 472.94 125.04 103.59 137.69 -248.38 -101.33 KD P.I. KD 1.48 4.33 4.65 1.54 1.84 4.29 2.67 3.52 3.78 2.63 4.11 3.22 0.12 Money Money One 87,.3 62.52 59.96 15.12 49.30 79.13 32.81 89.57 68.70 91.58 97.67 27.17 27.47 36.46 82.79 104.96 141.20 121.82 127.66 103.59 121.53 130.65 119.60

1.96 3.57 -1.05 -5.64 -2.48 10.97 15.03 KD N.E. KD 55.86 87.26 65.30 35.09 51.29 89.57 58.61 2.12 6.20 6.63 2.17 2.51 5.97 3.86 3.78 6.47 3.84 5.79 4.52 0.04 133.00 686.16 159.70 152.89 128.68 107.19 105.07 170.62 213.90 197.99 180.09 199.51 424.98 335.95 -275.74 -248.38

HI Conservative Locusta Cash Ilirika E. Ilirika 91.31 90.15 57.43 69.20 55.58 76.23 89.33 21.32 63.79 107.58 199.51 163.61 143.29 109.34 121.82 110.40 128.06 129.39 140.59 168.49 206.26 196.62 179.63

Ilirika A.T. Ilirika 1.46 4.51 4.72 1.45 1.67 4.27 2.72 2.63 3.84 3.39 4.09 3.15 -0.03 HI Cash 78.52 86.93 23.40 54.28 98.63 43.42 31.50 80.09 19.62 56.96 102.87 180.09 135.75 151.28 141.20 146.16 129.13 142.75 165.24 255.28 168.49 182.58 130.71

7.52 3.57 3.83 -4.92 19.56 23.33 15.78 HPB Dion. HPB 7.46 45.69 49.47 86.43 35.13 39.52 28.60 65.30 80.74 12.20 15.12 44.34 25.84 48.72 41.54 63.02 59.49 50.93 23.40 57.43 44.09 12.42 2.31 6.59 7.14 2.38 2.77 6.40 4.14 4.11 5.79 4.09 7.53 4.90 0.09 104.22

HPB Obveznički HPB Novčani HI Growth HI

52.49 72.50 49.47 40.03 52.54 52.19 87.26 91.51 48.79 59.96 51.09 71.67 26.29 35.75 42.88 49.92 89.45 92.19 86.93 90.15 89.86 97.89 43.78 Equity

1.86 5.13 5.55 1.86 2.25 5.01 3.28 3.22 4.52 3.15 4.90 4.65 0.14 Fima Fima Erste Money 5.04

-3.98 -9.65 -6.30 72.95 49.92 63.02 54.34 70.63 32.81 53.58 19.62 21.32 -20.27 -58.17 -58.79 -48.29

7.95 7.52 1.96 3.69 9.20 9.07 100.01 417.02 125.51 244.84 -275.74 -204.43 13.74 Capital 2 Capital Capital One 84.16 92.19 50.93 63.79 72.28 26.22 80.84 16.21 37.17 58.61 96.79 132.85 113.23 119.60 101.22 121.52 125.51

131.29 210.09 165.24 140.59 101.37 137.69

0.12 0.03 0.00 0.20 0.11 0.10 0.12 0.04 0.09 0.14 0.21 Equity -0.06 -0.03 Adriatic Agram Cash Euro

75.85 52.49 45.69 62.52 51.53 47.78 59.21 72.97 28.62 53.14 38.02 39.82 72.95 52.69 84.16 78.52 91.31 55.86 59.42 93.31 72.99 102.28 101.45 A1

6.80 1.09

-6.30 52.69 89.45 59.49 87.63 79.10 41.39 68.68 98.23 36.30 79.14 52.40 69.55 210.74 131.29 142.75 129.39 197.99 200.31 145.95 108.48 Fund

ZB Europlus ZB Plus Raiffeisen Cash PBZ Dollar PBZ PBZ PBZ Euronovčani PBZ Novčani PBZ OTP Novčani OTP Money One Money Locusta Cash HI Cash HPB Novčani Erste Money Erste Capital One HPB Obveznički HI Conservative Neta Emerging Bond Neta Emerging PBZ Bond PBZ Raiffeisen Bonds ZB Bond Fund Fund Agram Euro Euro Agram Cash A1 Adriatic Equity Capital 2 Fima Equity HI Growth HPB Dion. Ilirika A.T. Ilirika E. KD N.E. KD P.I. KD Victoria Neta Frontier Neta G.D. Neta N.E. Neta US Ind. OTP M20 OTP E. PBZ Plat. B.C. Plat.G.O. ZB Ak. ZB Euro. ZB Trend Table 4.12: The matrix of variance and covariance of the observed cash funds of the observed and covariance 4.12: The matrix of variance Table Table 4.10: The matrix of variance and covariance of the observed equity funds of the observed and covariance 4.10: The matrix of variance Table bond funds of the observed and covariance 4.11: The matrix of variance Table

Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 31 /// /// Call for papersI. Kristek

I. Srdarević, Table 4.13: The matrix of variance and covariance of the observed balanced funds HPB HI KD ICF PBZ ZB Fund Global Balanced Balanced Balanced Global Global OTP HPB Global 42.40 Uravnoteženi 59.10 39.57 HI Balanced 116.8042.40 41.51 41.16 -19.65-2.02 67.4452.49 41.10 47.03 KD Balanced 38.63 -23.33 75.94 43.08 58.74 ICF Balanced 41.16 38.63-2.02 -23.3360.14 199.97 -29.92

-19.65 52.49 75.94 -63.46 57.09-9.36 OTP 67.44 -63.46 158.64 78.64 UravnoteženiPBZ Global 59.10 41.10 43.08 57.09 53.21 ZB Global 39.57 47.03 58.74 -29.92-9.36 53.2164.50 95.43 78.64 covariance matrices for equity and balanced balanced funds. According to the level of risk, funds do seem alike, the values of covariance of after balanced funds the bond funds follow, balanced funds are lower in comparison to equity while money market funds are the least risky. funds. Unlike equity funds, none of the values of The same ranking of funds based on the level of balanced funds are higher than 79%. The funds risk was shown from value at risk (VaR). Thus, based on all measures of risk, volatility of fund return is highest in equity funds. ZB Global and OTP Uravnoteženi have the highest highestpositive negativevalue of covariancevalue of the of mentioned 78.64%. The measure funds Further research should connect volatility with OTP Uravnoteženi and ICF Balanced have the the performance of investment funds. In public of -63.46%. that risk is a function of return. Investment 5. CONCLUSION fundsand scientific can serve circles, as therean excellent is a common sample remark for testing this hypothesis. The fact of the matter is Risk implies a situation in which possible that these two variables are closely connected, outcomes and the probability of its appearance but the question remains whether higher volatility actually results in higher returns on Individuals often perceive risk as a danger of a funds. are known, yet the final outcome is unknown. risk does not solely denote the possibility of possible loss; however in the world of finance REFERENCES risk can be labelled as a possibility of making loss but also the probability of profit. In finance, is wanted, hence, it can be both better or worse inthe relation final outcome to the expected different outcome. than the Risk one cannot which 1. Split.Aljinović, Z., Marasović, B. and Šego, B. (2011) be equated with uncertainty since in a situation Financijsko modeliranje. Split: Ekonomski fakultet 2. Brooks, C. and H. Kat (2002), The Statistical of uncertainty neither the outcome nor the Properties of Hedge Fund Index Returns and probability of its appearance are known. Their Implications for Investors, Journal of Alternative Investments, 5(2), pp. 25–44. For measuring risk and comparing it based on the measures of statistical dispersion and value 3. Copeland, T. E., Weston, J. F. (1988) Financial at risk, 50 UCITS funds, which have continuously Theory and Corporate Policy, Don-Mills: Addison- conducted business in the period from 2009 Wesley. until 2014, have been chosen. In the selected sample, equity funds have prevailed. Measures of statistical dispersion have shown that the 4. Dzafic, Zijad, and Bejić Jozo, (2012), riskiest funds are equity funds, followed by Poduzetništvo i tržište rada, Synopsis Zagreb i Synopsis Sarajevo, 2013.

/// 32 Economic Review – Journal of Economics and Business, Vol. XV, Issue 2, November 2017 Risk Ranking of Open-end investmentCall Funds for papers in the Republic of Croatia ///

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