Popular capitalism is only just beginning to show its head in Portugal, one of Europe's most risk-averse nations. With one of the highest savings ratios on the continent, bank deposits of one kind or another still dominate the savings scene.

Mutual funds date back to 1965, but after the military takeover in 1976 all existing funds were nationalised and participants compensated by the state. In 1982, with a change of government, a new framework for funds was introduced, and the industry only really got going in 1988 when legislation re-introducing closed-ended funds was enacted.

Money market (tesouraria) and bond (obrigacoes) funds take more than 80% of the market with property funds accounting for much of what's left. The five leading domestic banking groups - Banco Comercial Portugues, Caixa Geral de Depositos, Banco Espirito Santo, Champalimaud Group and Banco Portugues de Investimento - account for four fifths of the industry, with only minor foreign involvement.

Recent developments suggest that the investment market may be changing. The adoption of the Ucits Directive in 1994 also marked the opening up of the market to funds of funds, and the following year saw the introduction of personal equity plans. These are linked to pension or investment funds.

Personal equity plans have not taken off, but nevertheless represent a move towards taking a higher risk profile. This is also evident in the change that will allow pension fund portfolios to invest up to 30% in equities (up from just 10%). David Hunt