Common funds: the alternatives that the market looks at to get out of the Argentine risk

During the month of September and the first days of October, the investors They decided to rotate their portfolios. According to him Personal Investment Portfolio (PPI), in the market of Mutual funds A preference was noted for more liquid instruments, with less exposure to sovereign risk (such as Money Market FCIs), or for dollarized assets. This explained much of the fall in the prices of Treasury securities in pesos and the rise in financial dollars in recent weeks.

In this sense, as stated Adcap Financial Group in consultation with Ambit, subscriptions in Common Funds Dollar Linked which forced some managers to suspend subscriptions, recorded last Thursday pre-STEP levels, at the same time that the ransoms fell in CER Funds. Along these lines, the expectation of devaluation could be clearly observed with the future dollar, where the dollar in December was quoted at an implicit annualized effective rate of 15.258% and where the Central Bank decided to intervene.

Beyond this situation, in the medium term the scenario for Argentina looks challenging and there are some alternatives that are little considered but that could become an option if it is considered to completely leave the Argentine risk. In this note, some of the options.

FCI: the most recommended to get out of the Argentine risk

According to the analysts consulted, the investor must define whether he wants to continue exposed to Argentine risk through companies (aggressive profiles) or if you prefer to escape from sovereign risk and turn towards a risk Latin American through FCIs that include sovereign debt from other countries (for conservative profiles).

Sergio Cohen by Cohen Aliados Financieros in dialogue with Ambit highlighted some FCIs for both options in Dollars in the medium term:

• The bottom COMPASS FIXED INCOME FCI (u$s) Its objective is capital appreciation through investment in fixed income instruments from Latin America and to a lesser extent from other markets. Estimated 1-year yield of 1.8%. Currently the majority trend is for Chilean credits (sovereign and corporate) and Brazilian sovereign and corporate credits.
• Schroder Income (CLASS A- u$s): The objective of the Fund is to obtain profitability in dollars by diversifying risk and mitigating volatility, investing in short-term fixed income assets in dollars with a high credit rating. The portfolio will be invested mainly in Chilean, Brazilian and Uruguayan sovereign and corporate bonds. IRR of 6.3%.

“In these we have more compressed returns but much less volatility”explains Cohen.

Other options are also available such as:

• Premier Global Dollars (u$s): Invest in Mercosur + Chile and US fixed income assets without Argentine risk. Duration of 3.19 and maximum performance of 1.20%.

Fixed income dollar (IOL- u$s): seeks to preserve capital with a diversified portfolio of fixed income assets from the USA and LATAM. The portfolio is made up of American treasuries, short-term LATAM sovereign and corporate debt in dollars and low volatility. It contains 37.20% LATAM Corporate Bonds and 27.02% LATAM Sovereign Bonds. Minimum investment of US$1,000 and an IRR of 4.88%.

Although Alonso considers a good alternative investments in LATAM to get out of the Argentine risk, “they look volatile” due to the rise in rates. Thus, he assures that we can expect “a new Fed rate hike and then start to decline next year.”

“When the Fed raises rates, generally emerging markets suffer a drop in prices” and affirms that, between being in hard currency and investing in that type of asset, he prefers “to invest in another more conservative asset and when it calms down and the announcement passes, see what should be done.”

FCI: higher corporate debt, with some local risk

“The investor here has to know that although he is buying corporate debt Argentina and is seen as more invulnerable, something may suffer with the current context. But there is also a lot more paid that latin american debt”Cohen stated.

While, Elena Alonso He thought that they are a “good option” corporate bondsbecause if you leave them in the medium long term you ensure that you collect coupons and generate a return on the dollars.”

The options are:

• Balanz Savings Dollars (u$s): Balanz Ahorro Dólares seeks to achieve capital appreciation through investment in a diversified portfolio of corporate fixed income assets of high credit quality and denominated in dollars, with a medium-term investment horizon. The minimum investment is US$100 in the medium term. Estimated 1-year return: 6.77%.
• Multimarket Consultation III (u$s) is an FCI composed mainly of Corporate Energy and financial Bonds. For its part, it has an estimated return of 8.91% at 1 year and the portfolio is made up of 73% corporate and 5% provincial.
• FCI Adcap Currency ($): It is a fund with a moderate profile in pesos, which seeks to provide the most efficient coverage possible against the risk of a potential devaluation jump. The fund’s investment policy is mainly composed of ON and dual bonds, in addition to dollar linked. They serve a medium-term investment horizon.
• Premier Renta Plus ($): The fund will invest mainly in national and provincial public securities, Negotiable Obligations, Dollar Linked public securities, BCRA debt instruments, dollar futures negotiated through Rofex and Fixed Term Funds. It allows obtaining a return higher than the average rate of placements in pesos of short-term fixed income instruments. Currently, according to data available from Bymacontains 72.61% ON, 6.44% guarantees and 5.35% Funds.
• FCI Adcap Dollar Income (u$s): includes corporate bonds from Argentina, Uruguay, Chile, Brazil and Mexico with 14% of Argentine provincial bonds. In terms of performance, it has a TNA of 7.27%, a direct return of 5% so far this year.