The drop in mutual fund assets, caused by the rough waters that local capital markets are currently sailing through, is forcing fund managers to intensify their efforts to develop the best products for overcoming the crisis.
One of these alternatives, which was considered at the October conference of the Argentine Mutual Fund Association, was to give the go-ahead to the project to emulate Spanish Fondtesoros in this country.
Fondtesoros are a type of mutual fund, created in Spain, based on an agreement with the Treasury whereby fund managers undertake to invest a considerable sum in government bonds, as well as agreeing to keep commissions and/or rates within an upper limit and establish low limits for minimum investment in order to be accessible to the vast majority of savers. In its original version, the scheme also involved considerable tax allowances and the State financed the publicity campaign.
Although many Argentine fund managers are excited about this idea, the eventual feasibility of these products will depend on the Ministry of Economic Affairs. Market operators consider that, although the reception has been encouraging, they will have to follow up very hard for Fondtesoros to become a reality.
However, while this project is advancing, local fund managers are not sitting idle, and many are trying to recapture the good spell that fixed-income funds enjoyed in the first half of the year. During that period of time short-term bond funds enjoyed broad acceptance by the public, as also did the so-called "maturity" products launched originally by Schroder Mildesa Asset Mgt., HSBC Administradora, 1784 SA and Santander Investment, and now followed by Exprinter Administradora SA.
Some banks are trying to persuade their clients to take advantage of high internal rates of return currently offered on government bonds. "Lack of awareness by the rest of the world with regard to the strength of our system, and ignorance of the Argentine economy's performance in successfully facing earlier crises, mean that local assets are currently sharply discounted," claimed Laura Toustau, an analyst with 1784 SA. For this reason, the company sees a very large opportunity for investing in fixed-income instruments at present.
The people at Galicia Administradora de Fondos, are also aware of the good buying opportunity, but they do not see this being easily understood by clients. "The retail market reacts more through sensitivity to volatility than to the yield to maturity of a bond," explained Galicia manager Jorge Viana.
According to Viana, the first half of the year saw a good response from investors to short-term bond funds, "which are instruments used by the bank to progressively educate its clients."
According to Eduardo Alvarez, head of the product area at Lloyds Investment Managers, "clients are highly conservative and many of those who bought fixed-income funds have now shifted to CD products, waiting for the calm to return."