more funds increase their risk due to obligation

Are already more than 60 investment funds in Spain those who have been forced to have to modify up your risk profile after the Covid-19 crisis. The high volatility of the markets seen during the last four months has caused management companies such as CaixaBank, Sabadell AM or Santander to comply with ESMA’s requirements when it comes to marketing their products with the greatest possible fidelity in terms of their behavior in stress scenarios. In the last week, you sign as Bankia, Mutuactivos, Credit Suisse or savings banks they have also had to give in and reformulate the brochures of almost a score of funds.

Aug 09, 2020

On at 06:00

Bankia Asset Management is the one who has had to retouch the most funds in this second wave, up to ten, according to the CNMV. Among them, the Bankia Small & Mid Caps España, by Iciar Puell, that has gone from a risk five to a risk six, the Bankia Flexible Duration Bonds (from two to three) or the Bankia Futuro Sostenible (also from five to six). Puell’s fund falls 18.6% on the year, according to Morningstar.

Other managers have had less funds in the wire, although they have also yielded for some of their funds. Mutuactivos has done it for three of its products, including the Technological Mutual Fund, same number of vehicles that Ibercaja Gestión has transformed, among which is the Ibercaja Real Estate Sector. In both funds, their numerical risk indicator has increased from five to six, although their behavior this year has been very uneven: while the first one rises by 16.6%, driven by the large Wall Street technology companies, the second loses 19.3%.

These movements have also shocked the more conservative funds. The Mixed Rural Fund 25, of Gescooperativo (whose bank is one of the two that bring together rural savings banks), has risen from three to four in risk, while the CS Duration 0-2, from Credit Suisse Gestión, has seen its indicator go from two to three.

“Said change it is not due to a change in the fund’s investment policy, neither to a change in the selection criteria of the assets, nor to a different investment strategy, but is due exclusively to market volatility movements “, is explained in the respective relevant facts of these funds. The managers have made a commitment to deliver the renewed Key Investor Information (DFI) documents and brochures for these funds, together with their corresponding relevant facts, to the new participants at the time they subscribe the fund in question.

BANKS AND BOUTIQUES, FROM CAIXA TO ALTAIR

The risk indicator that the funds include in their DFI and in their prospectus moves on an ascending profitability / risk scale, ranging from one (low risk) to seven (high risk), as established by the CNMV. CaixaBank Asset Management was the first manager to take the step, two weeks ago. Later, it was followed by Sabadell AM, Santander AM, Unigest and Altair.

All these entities have proceeded in accordance with the ‘guidelines’ of ESMA, the European financial markets supervisor. From now on, the risk indicator that these funds have will be more realistic in terms of possible market movements when it is stressed to extreme levels, as has happened since March.

What has been seen since then is that the net asset value of these products (their price) has oscillated more strongly – due to the high volatility of the underlying assets – than the previous risk models of the entities had calculated before the coronavirus, This has led to significant handicaps in some of them and unpleasant surprises among clients, who believed that they had funds with less risk than they actually turned out to be.