January 26, 2021

Beware of the small print of the guaranteed funds | Economy

Beware of the small print of the guaranteed funds | Economy

Money has become very scary. After the beating suffered last year, investors take out their savings of the stock funds and seek shelter in the products, in theory, more secure. The greater aversion to risk is being exploited by financial institutions, which in the first months of 2019 have already sold half a dozen new guaranteed funds that have netted more than 120 million euros in net balance (less exits). It is a very attractive investment product for the most conservative profiles, but not exempt from small print that the saver should take into account. Ángel Martínez-Aldama, president of the Association of Collective Investment Institutions (Inverco) emphasizes that they are funds that insure the totality of the initial investment plus a certain profitability, at a certain date (expiration date of the guarantee). "That is to say, the financial institution guarantees that at least no money is lost with the investment".

Two groups

exist two large groups of guaranteed funds. Some are fixed income, which insure the initial capital invested plus a fixed yield at the expiration of the guarantee, and those with variable returns that promise the money invested plus an additional yield linked to the evolution of the market. Martínez-Aldama warns: "Remember that the guarantee is granted only at the expiration, and if we need to leave early it is possible that the fund will charge us some type of commission for early repayment." Also, when you leave early, the saver will receive the money according to the valuation that the fund participates in that moment. However, during the life of a guaranteed fund, the so-called "liquidity windows" are set to leave without paying commissions.

But this security of the guaranteed funds offers a less kind face. In particular, they involve high entry and exit fees if they are made outside the established deadlines, the guarantee is only at the expiration of the product and also the profitability obtained is very low today. "In the end, the guaranteed ones are a product of interest rates. Now the rates are very low and will not go up this year or next. It seems to us a bad option for the investor ", warns Juan Uguet, founder of the manager Augustus Capital.

Among the offers this year the most attractive for profitability is the Guaranteed Kutxabank, with an APR of 1.12%. To obtain this margin, the investment must be maintained until March 2023. The least generous is the Bankinter Ibex Guaranteed Income, with a fixed annual return of 0.35%, money that does not accumulate and that the saver receives. Although it offers a final candy if a condition is met: in the last refund that will be made in August 2025, an additional 1% can be obtained on the initial investment, if the arithmetic average of the closing prices of the Ibex 35 on the 17th , July 18 and 21, 2025 is equal to or greater than the closing price of March 18, 2019. Otherwise, there will be no increase in the last refund, indicated in your brochure.

Annual returns of 0.7% in the Guaranteed 2027 Ibercaja, 0.6% in the Guaranteed Rural 2027 or 0.5% in the Guaranteed CA Bankoa, give enough clues as to where the profits of these products currently move.

Although within the modalities of guaranteed, those with fixed yield are the most common, that of Bankinter offers a mixed formula, with a fixed part and a variable one according to the progress of the Ibex 35. Those with variable returns are less and the Kutxabank Garantizado Bolsa 8, which sets the profit on the evolution of the Eurostoxx 50 Price index over a period of six years. In the brochure of this fund it is estimated that "the gross return of the total of the initial portfolio of fixed income and liquidity will be, at maturity of the guarantee, of 4.54%", although they warn that the probability of not winning anything is of 74%.

Commissions are an important burden for the guaranteed. Especially if you do not take advantage of the subscription and final refund periods or the liquidity windows where these costs no longer apply. Those launched this year have, for the most part, subscription and reimbursement commissions of 5% of the money that has been invested, although some lower them to 3%. That is why it is necessary to insist that if the saver decides for these funds he must keep his money until the expiration. Otherwise, "it is preferable to invest in other types of funds," says the president of Inverco. Martínez-Aldama explains that these products are suitable for investors whose main objective is the preservation of capital, regardless of the generated profitability. "For example, for savers who have decided to obtain an extra return on their deposits, after years with interest rates close to 0%. In times of high volatility market, they are usually very demanded by the guarantee offered by guaranteed initial capital ".

José María Luna, director of analysis of Arquia Banca, points out that the return of guaranteed funds has logic for banks and certain investors. The bank manages to transform the deposits of its clients into a product to which commissions are charged. They prevent the client from taking out the money and, since there will be no losses, they get the client satisfied or, at least, do not get angry. On the investor's side, the experts point out that there is also interest, since there is a conservative, defensive profile that "does not want noise in their portfolios".

How they are manufactured

Guarantees represent around 8% of total investment funds in Spain. But for example at the end of 2008, during the financial crisis, they accounted for a third of the total. In Europe, apart from Spain, guaranteed funds have a long tradition in Belgium and France.

They are based on the purchase of debt or fixed income, whose prices oscillate in the markets, and in addition the manager adds a financial derivative (options, futures) to ensure the capital at maturity. This would be applicable to fixed-rate ones, although those with variable yield are very similar. They also tend to have an important part of their portfolio in fixed income, with a higher-cost financial derivative that allows the investment objective to be achieved, whether for the Ibex 35 index, a European index or a portfolio of securities. These financial derivatives, given their special characteristics, are usually acquired from an investment bank that is in turn responsible for securing your bet. For the experts consulted, this type of funds do not go far from what is called passive management, because once the product is designed, there is no need to manage the portfolio.


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