The dynamics of the Common Investment Funds continued to be conditioned by electoral uncertainty, the devaluation of the official exchange rate and the volatility in parallel dollars. In this framework, throughout September, immediate liquidity funds continued to position themselves as favorites among investors and accounted for a large part of the positive net flows that the industry had in the month. Analysts consulted by Ámbito warn that, in the face of the general elections, the “risk off” of sovereign assets will continue and the dollarization of portfolios will deepen.
Throughout September, Money Market funds accumulated net subscriptions of $759,000 million, deepening the positive trend they had throughout the year. So far in 2023, the T+0 funds only had redemptions in June for -$234,946 million. In the rest of the months, they accumulated positive net subscriptions of $1.6 billion.
Paula Gándara, CIO of Adcap Asset Management, pointed out that “in September, the assets of the Common Investment Funds (FCI) industry had a growth of 10.8% compared to August, reaching $15,787,174 million under management. During the month, the industry had positive net flows of $567,629 million, mainly in the Money Market segment. However, the rest of the segments had net redemptions. We consider that the dynamics of fund flows are related to the uncertainty inherent to the electoral calendar, leading investors to take more conservative approaches.”
In this framework, the FCI dollar linked had redemptions of -$13,540 million throughout September due to a more conservative positioning by investors. Throughout August, the FCIs indexed to the exchange rate had shown a positive dynamic before the devaluation and then a negative one, accumulating approximate rescues of -$34,000 million throughout the month of August. Thus, throughout the year, the DL FCIs had positive flows in July, May, April and March with redemptions of $40,000 million, $43,220 million, $48,588 million and $7,539 million respectively. In the remaining months, the DL had rescues of $34,666 million.
As for the CER FCIs, they resumed the negative trend they had throughout the year and accumulated rescues for $45.3 billion in September. In this way, they only achieved positive subscriptions in August and June for $100,000 million and $29,531 million respectively so far in 2023.
Ezequiel Ferrando, Investment Manager at Mariva Fondos, highlighted that “we interpret the sudden exit of this type of instruments as a risk off movement of sovereign debt mutating towards Money Market funds. What we also see is that the sovereign curve seems broken. It is difficult to find payers for the 2024 section onwards and it is only currently supported by the liquidity of the BCRA, which is happening in a disorderly manner because it appears in some papers that the Treasury tenders and in others it does not. Then, anomalies are found such as bonds that mature in March yielding 12% and another that a month later yields close to 8%. Regarding returns, Money Markets returned 8.5% positive with rates at these levels, while T+1 or CER had an average return of -1.38%.”
Moving forward, Gándara considered that “the market is in a ‘wait and see’ position given the uncertainty that the electoral context brings us. Uncertainty is growing, and we believe that the positioning in conservative instruments will intensify at least until the general elections, and if there is a runoff, the investor will expect to know the economic plan of the winning candidate. The strategies for the elections are capital coverage in conservative instruments, such as Money Market funds (T+0). For investors who may have a little more tolerance for volatility, it is advisable to take advantage of the high accrual of rates and also be covered from the most important risks of the economy: inflation and devaluation.
Likewise, Ferrando pointed out: “in terms of the coverage and dynamics that we analyze, in the face of the elections we understand that the risk off towards sovereign assets will continue, so the Money Markets will continue to be among the favorites to have free availability of capital to make decisions. On the other hand, we understand that portfolio dollarization will continue, so we do not rule out an increase in the flow to dollar-linked funds, even though investors know that it is not a perfect hedge on the official exchange rate.”
Source: Ambito
