In a recent report by Moody’s Local Argentinaone of the risk rating agencies that most closely follows the local market, indicated which Common Investment Funds (FCI) will continue to stand out at the end of the year. Surprisingly, despite its low profitability, a High liquidity fund continues to attract more and more investors.
For Moody’s, although there are other instruments that provide better profitability, Money Market (MM) funds in pesos will continue to lead the fund industry in Argentina, due to the “transactional” nature of the market.
Additionally, they expect assets under management (AUM) to increase. MM in dollars, which represent 1.3% of the entire money market segment, which although they offer a The best rate compared to the fixed terms in dollars offered by financial entities, are below the returns in hard currency offered by another conservative instrument such as Negotiable Obligations (ON). It is important to remember that this instrument was born driven by the need for investors to include conservative assets in their portfolios.
Moody’s Outlook for the Mutual Fund Industry
Money Market in pesos
According to analysts, MMs have a 57.4% industry share in terms of AUM at the end of the third quarter. Over the last twelve months, growth in AUM for MMs was 221%, having grown above inflation for the period. Although the drop in rates affected yields, which also remained negative in the third quarter, net subscriptions grew by 7.5% for the period.
These funds concentrate approximately 74.5% of the AUM in the first ten issuers, most of which are banking entities. In the top 3 of the podium is Banco Nación (15.1%), Bolsas y Mercados Argentinos SA (11.1%) and Banco Provincia (9.6%).
These portfolios are mostly made up of liquidity, fixed terms and pre-cancellable fixed terms.
T+1 Funds
For Moody’s, the demand for these funds It will decrease in the coming months as the downward path of inflation continues to materialize. “This could eventually be exacerbated in the event that the data for said variable is below what the market expects for the rest of 2024,” they warned.
Relative share in the industry remains below 5.0%, while the effective quarterly change in AUM for this segment was -14.5% for the quarter.
The quarter (August, September and October) was characterized by a marked trend of net redemptions – outflow of flows from the segment – of varying magnitudes that responded mainly to the market expectations on the evolution of inflation.
These funds are almost entirely composed of public securities, given that the Argentine State is the main placer of instruments adjustable by CER.
Among the top 3 issuers are: 90.5% the Argentine State, Telecom Argentina SA (0.9%) and ArgentFunds SA (0.6%).
Dollar-Linked Funds
Finally, for specialists, investor interest in Dollar linked funds will remain low “in a context where the devaluation of the official exchange rate continues to evolve at 2% monthly, along with a downward exchange rate gap with respect to all alternative exchange rates,” he noted.
“Net subscriptions for the quarter were mixed, where a positive value stands out for the month of July, after a monthly inflation figure slightly higher than expected that could eventually exert some pressure on the official exchange rate. However, with the subsequent monthly data, the downward trend observed during the last quarter continued. It is conditional on the evolution of inflation in the coming months, the real exchange rate, the alternative exchange rates and their respective gaps.“they explained.
In terms of returns, during the third quarter of the year, the segment Dollar linked showed a 17.7% recovery in AUM, mainly due to positive net subscriptions mentioned above, while the average performance for the period of 3.8%, below inflation and the increase in the official exchange rate of 6.5%.
The greatest exposure of these funds is concentrated historically in sovereign risk, because these instruments are the most used to carry out hedging strategies.
Among the three main issuers, the Argentine State represents 65.5%, Telecom Argentina 3% and Mercado Argentino de Valores SA (2.3%).
Source: Ambito
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