With the current exchange rate stability, there is a resurgence of interest in T+1 funds and the emergence of new alternatives. However, recent fluctuations in the exchange rate generate new investment dynamics.
Despite this context of falling inflation, in recent weeks we have noticed a marginal change in this dynamic of exchange rate stability.
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If management companies have shown anything over recent years, it has been their ability to adapt to the rapid and sudden changes that occur in the Argentine economy and market. We have seen new categories of investment funds appear that had their moments of rise and decline, and then grew strongly again. Particularly we refer to categories such as Dollar Linked, T+1 or CER.
Since the beginning of the year, and given the achievements that the government has been showing in its fight against inflation and the resulting exchange rate stability, we have seen a sharp drop in investor interest in both funds that provide inflation and exchange rate coverage, and a strong revival of appetite for the T+1 funds in the search for Carry in pesos.
Also, and following this line, we have seen funds emerge from LECAPs with settlement in T+0 as an alternative to the Money Markets. Our background IEB MULTI-STRATEGY V is an example of these funds that have similarities and differences with money market funds. On the side of similarities is the fact that the settlement of the rescues is done in immediate cash (after the market closes), but on the side of differences we must highlight one that is not minor and that is that these funds, unlike of the Money Marketsare not pure accrual funds and have volatility, and may have negative share variations.
Despite this context of falling inflation, in recent weeks we have noticed a marginal change in this dynamic of exchange rate stability. We believe that this is due, on the one hand, to doubts regarding the sustainability of the current “crawling peg” at 2% monthly and, on the other hand, the jump that occurred in the prices of alternative exchange rates, perhaps explained in part by a pace of agricultural liquidations that is not meeting expectations.
Thus, without this meaning a drop in interest in the search for accruing rates in pesos, we have seen greater demand for coverage through corporate and sovereign bonds and mutual funds. Dollar Linked, as well as instruments and funds in MEP dollars. In the latter case, these are funds that invest in a diversified portfolio of negotiable obligations or sovereign bonds, denominated and payable in MEP dollars, of which our fund STRATEGIC IEB -which will be released next week-, is an example of this category.
It is important to highlight that, unlike a fund Dollar Linkedthese funds “MEP dollar” are subscribed and redeemed in dollars, while D.L. They are subscribed and redeemed in pesos, and the instruments that comprise them are denominated in dollars, but their income and amortizations are settled in pesos to the official dollar.
The ability to adapt and the emergence of new investment options highlight the flexibility and dynamism of the fund industry. However, the present uncertainties require constant analysis and a well-informed investment strategy to navigate these times of volatility and change.
CIO of IEB Funds.
Source: Ambito
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