The Finnish mutual fund industry has the dubious distinction of sharing its birthday with the Crash of 1987. Not surprisingly then, funds under management grew only slowly in the early years. Only in the last two or three years has the industry really taken off, and today it controls assets of around FMk18.7bn ($3.5bn).

Currently there are 15 management groups selling ap-proximately 80 funds, split fairly evenly between equity, balanced, bond and money market vehicles. The latter are a relatively recent innovation - Finland has had short term fixed interest funds for a couple of years but true mon-ey market funds have only been allowed in the last couple of months.

Largest fund group, Merita Bank, is the leading retail bank in Finland, but the next three largest operations are all run by independent fund managers. Most of the major banking groups in Finland have associated life assurance companies, and linked life fund buying of in-house mu-tual funds is a growing constituent of bank sales.

Legal counsel for the Fin-nish Association of Mutual Funds, Thomas Hukka, says there are no obstacles in the way of foreign purchases of Finnish mutual funds, but is not aware of much activity on this front. Most foreign eq-uity investment in Finland tends to be direct and often extends not much further than Nokia, the shares of which are a large component of the Finnish index.

Domestic institutional buying of Finnish mutual funds is high however, especially with the bond and money market vehicles. This is a question of cash management rather than any fiscal incentives - the institutions find they receive much higher rates of interest than they would get from bank deposits, currently paying only 0.5 - 1.5%.

The amount that insurance company pension schemes can invest in equities was re-cently raised, but evidence suggests that any extra investment has been direct rather than via mutual funds. For the future, mutual funds could get a boost if tax incentivised private pension ar-rangements are allowed, in the same way as in the US. David Hunt