Egyptian investment funds have a sad dramatic story full of challenges and attempts to survive for nearly 30 years, and we try here to document the stations of that journey, and monitor the most prominent challenges facing this investment vehicle.

In the second half of 1996, the Egyptian Stock Exchange entered a phase of continuous rise, which encouraged banks to establish new investment funds, amounting to 4 funds in that period, and with the benefit of these funds from the rise of the stock exchange and the significant increase in the value of its documents, the attention of many turned to investing in funds.

This demand encouraged other banks to establish new funds, so that when American Express bank fund documents were sold, queues of people lined up in front of the bank's branches to buy, and some sought to obtain a "wasta" from within the bank to buy its fund documents.

In late 1996, Mrs. Souad Khaled, a member of the Board of Directors of the Cairo Women's Association, invited me to give a lecture on investment funds, and I noticed that the age of the members is not less than 65, most of them from wealthy families, and I learned that they used to host artists for a fun evening, which explained to me the superior elegance of the attendees who were surprised by its dry subject and covered their faces.

And God inspired me to start my conversation by asking one of them about the price of gold at that time, and she responded coldly and wrote it on the board, and asked another about its price at the beginning of the year and replied frowningly and wrote it as well, then I asked them about the interest rate in banks and I wrote it, then I wrote to them from my papers a distinctive share price on the stock exchange and how it developed from the beginning of the year to the day of the lecture, achieving significant growth, and I explained to them the meaning of the stock simply, and I began to compare the rates of return on gold and deposits and the rates of return of that share, The result was in favor of the stock, and then compared them to a second and third stock, and it appeared that the growth rate of stocks - at that time - was much higher than gold and deposits.

She noticed that the signs of grimace were declining, so she was encouraged to move to the definition of an investment fund as a container that invests on behalf of its owners through specialized experts, who analyze the financial positions of companies, follow their performance and choose the most profitable, which makes the fund a way for small savings owners to enter the world of the stock exchange full of puzzles, and after the lecture I found some of them staring at me asking how to invest in the stock exchange and investment funds.

29 years since the start of investment funds

Historically, Egypt did not know investment funds before the issuance of the capital law in mid-1992, a year after the economic reform program that Egypt committed to with both the International Monetary Fund and the World Bank.

It took 27 months for the National Bank of Egypt (the largest Egyptian bank) to establish its first investment fund in September 1994, and it required the help of an Egyptian expert working abroad, which was repeated in Banque Misr (the second largest bank) that hired another Egyptian expatriate, followed by the Egyptian American Bank establishing a new fund the following month, then Alex Bank in November of the same year, and in 1995 Banque Misr announced its first fund, followed by an insurance company and then banks Other, to end the year has been founded 5 funds.

However, the winds were not entirely favorable, as the stock market witnessed a period of price decline that lasted from late October 1994 to mid-1996, when its conditions improved and began to rise until February 1997, after which it returned to decline for a long period that extended until 2001, which was reflected in the conditions of investment funds, which fell below the nominal value in which they were issued.

Losses cause portfolio diversification

Thus, the simple investor, who turned to funds for a profit, became in trouble as the value of what he paid without obtaining a return eroded, and many recovered the value of their documents and the assets of the funds fell to less than half of what they started.

This prompted fund-creating banks to reduce investment in stocks, and to invest part of their balances in fixed-yield instruments to achieve balance, but two funds appeared that invest only in fixed-yield instruments such as bills, treasury bonds and deposits, and as a result, 19 of the 21 funds in the market made losses in 2000 and the two cash funds survived.

18 of those that invest in stocks continued to lose during 2001, until the stock market conditions improved in 2002, improving the performance of these funds by 9%, then increasing to 30% in 2003, and to preserve the deteriorating reputation of funds, banks expanded the establishment of cash funds that invest in fixed-return instruments alone (i.e. they are risk-free), and funds appeared that guarantee investors the origin of what they paid, and Islamic funds appeared that invest in the shares of companies operating in areas permissible by Sharia and others Islamic "cash", and the emergence of index funds that invest in stocks included in the main stock index consisting of 30 stocks, funds that invest only in the investment documents of other funds, funds that invest in fixed-return instruments in dollars or euros, real estate funds and charitable funds whose returns are donated to social activities, until there are more than 11 types of funds in the market.

Funds are still struggling to find a place among investment options in Egypt, as the dollar continues to appreciate and banks continue to issue high-yield savings certificates

37 cash funds and 17 Islamic funds

One of the funds also provided credit of up to 90% of what the investor paid in the fund, and a company began to establish a fund that invests in gold and another to invest in sukuk, so the number of funds by the end of 2021 reached 122 funds, including 34 cash funds, 3 Islamic cash, 27 shares, 10 Islamic, 7 fixed-income, 3 capital protection, 2 investing in other funds, 2 balanced Islamic and 2 investing in foreign currencies.

The funds data for 2022 have not yet been released, but other funds investing in various fields were established after 2021, and "cash" funds now account for about 85% of the total assets of all funds, if the National Bank of Egypt owns 9 funds with assets of EGP 50.5 billion, the value of the assets of 8 of these funds does not exceed EGP 1.2 billion, while the assets of its cash fund are EGP 49.3 billion.

Despite the increase in the number of funds, the number of equity funds remained stable between 2013 and 2021 due to the volatility of their performance with fluctuations in the performance of the stock exchange, whose main index declined in 2018 by 13%, rose by only 7% the following year, and then returned to decline in 2020 (the year of Corona) by 22%.

The stock index returned to rise in 2021 by 10%, and its thirtieth index continued to rise last year by 22%, which improved the performance of funds, especially with the growth rate of the septuagenarian index of the stock exchange 27%, so the average growth of Islamic funds during the year reached 27.7%, equity funds 22.7%, balanced 22%, capital guarantee and protection 11%, cash 10%, Islamic cash 9.6%, fixed income 8%, and foreign exchange 0.6%.

Despite the improvement in the returns of the funds, most of them came below the inflation rate, which in the last month of last year reached 21.9% according to the Mobilization Authority and 24.4% according to the Central Bank, however, the cash funds did not achieve a return of more than 10%, while government banks offered investors savings certificates with a return of 18% in March 2021, and 17.25% last October.

Others compare the returns of the funds with the much higher returns they have obtained, through investment in real estate, land, gold or foreign currencies, so they distract from investing in investment funds, as the price of gold (21 carat) increased by 114%, and the dollar increased - according to the official rate - by 57% during the year, so that the problem of the funds seeking to find a place among the investment options currently available in the Egyptian arena remains, in light of the continued rise in the dollar exchange rate (official and unofficial), and the continuation of Banks in issuing certificates of deposit with high returns.