It affects a portfolio of 2,000 million. The supervisor criticizes the lack of information provided by the managers to their clients
Almost 500 funds registered in Spain invest in high-risk bonds, low-credit fixed income and junk assets. This rebound occurs in a scenario of low interest rates, which has forced investors to bet on increasingly risky financial products in search of a difficult return. This situation has drawn the attention of the National Securities Market Commission (CNMV), which warned of the high risk of these investments, which have increased by 47% during 2019.
The president of the CNMV, Sebastián Albella, warned of this situation yesterday, during the presentation of the II Observatory of Savings and Investment in Spain, prepared by Bestinver and IESE. Far from alarming, he wanted to downplay the relevance of these investments that, for the moment, do not present a “worrying” or “significant” situation, although they must be “vigilant,” said the head of the supervisor. Mind you, Albella warned that Informational brochures must explicitly warn and inform the participant of the type of investment and in what kind of high-risk assets they are investing. In this regard, the CNMV has asked 200 of these fund managers to include such a warning – that it had been deliberately ignored from its customers and that it must clearly report the risk potential due to lack of liquidity in adverse market situations – , although only one hundred of them exceeded the percentage of 25% of investments in doubtful products.
They must include warnings
The president of the CNMV was tougher when he pointed directly to funds located in Luxembourg and Ireland – the ones that are most commercialized in our market besides the Spaniards – as the entities that have generalized this type of disinformation practices. “They do not include this warning when they invest in low-quality or risk bonds and should do so” so that they were on equal terms with respect to Spanish managers, which are more subject to these requirements.
Although the commercialized amount of this type of portfolios among retail clients is still “not relevant”, some of the main credit institutions have begun to invest in more risky assets, mainly in the field of private banking, offering vehicles with volatile capital and others of an alternative nature for certain segments. Although they have preferably been offered to large investors, up to 50 managers already offer this option to retail investors, 19 venture capital entities and 27 from collective investment institutions of the 254 in Spain, 20%. All these assets add up to a negligible equity of more than 8,000 million euros, although the investment in the highest-risk fixed income accounts for only 25%, around 2,000 million.