If there is an investment product that is easy to build today for management managers, that generates profitability and very few problems with the client, it is a fixed income fund of short duration, of no more than two years, essentially called a target fund ( never guaranteed). Even with a little more permanence to retain the client, with a 2%-2.5% expected profitability. “You have to get this type of funds like churros“, the head of a large management company in the Spanish market told me.
Your logic is overwhelming. At a time when Treasury Bills have ceased to have interest – in the last auction of the year they were placed at 2.2% – we must transfer all the money we can from deposits and fondtreasures to a simple product with hardly any market risk. “Like churros” is synonymous with cutting coupons, discarding any interest in actively managing, which if done well generates greater profitability than that achieved with maturities. To give an example, let’s think that this year there are many fixed income managers assets that achieve returns between 6% and 10%while if a manager had been left alone with a portfolio of ten-year bonds he could even suffer losses. You can lose money on fixed income even in a scenario of lower rates! Who bought a T-Notea ten-year American, at the end of last year, would lose 8%, which would remain at half due to the appreciation of the dollar.
To avoid these situations, entities prefer to continue frying hotcakes, continue selling objective funds with hardly any duration, play it safe and not take risks. Active fixed income managers, those who make cakes, however, advise extending maturities to the range of 3 to 5 years, as concluded in the last elEconomista.es Active Management Forum. But to make quality cakes you have to follow the market, buy/sell and, above all, analyze the companies and the debt that is acquired from them because that is where the additional profitability is generated compared to those that collect paper coupons from governments. .
But the churrera, which is also where the churros are made and not just the lady who makes them, is in the latter. The most conservative funds have managed to add nearly 700,000 participants in recent years, as a flagship in which to enroll all savers in deposits and as a perfect product in which to accommodate those who desert Treasury Bills. Although, without a doubt, the most striking fact is that the funds objectives count 560,000 participants when just four years ago there were 2,000.
The positive part is that the savings culture spreads. The negative is that staying at the churrería and not reaching the pastry shop is proof that the savers are very far from being investors.
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