“Investors will return to Spanish funds when competition from banks softens”

Will investors make a comeback to Spanish funds in 2013?

Domestic fund management firms in Spain have had a tough time during the last years, but international funds have been luckier. Investors have punished the Spanish investment companies, to be sure, but managers of foreign funds would tell a different story. Since the beginning of 2010 until late last year, for instance, we have seen a quite strong capital inflow, and this is the case as far as I know for most of our sector.

Where does that capital come from?

Money comes from private banking networks and personal banking, too, from clients that wanted to diversify their portfolio and increase exposure to non-Spanish markets. There has been some competition factors that worried us whether you are a Spanish fund or not, namely the high interest rates of bank deposits. I believe rates will go down and investors will then go back to funds, also domestic funds, to get better returns.

Which one do you expect will be the most favoured by investors this year?

Global funds have proved to be very attractive for investors, and this is a trend noticeable everywhere, not just in Spain. Investors seek high yields in an environment in which the European Central Bank makes liquidity more available and interest rates fall. I’d say fixed income products, emerging market debt and some degree of risk will be on the table. And corporations with high dividend policy, too.

Also, investors are paying more attention to multi-active funds, with diversified portfolios in different class assets. Active management is, of course, key to counter the current levels of market volatility and macroeconomics risks.

Will Spanish funds benefit from these trends?

My personal view is that we need to be cautious. The fiscal situation and growth expectations in Spain call for precaution.

Is it likely that the ECB cuts main interest rates?

The central bank could leave the rate at 0.50 from the current 0.75, the reason being that the overall economy of the eurozone is faring not too well and inflation is under control. Unless we see growth, the probabilities of rates falling are high. Another matter is the effect of this change, which I think would be very limited.

And meanwhile, the Federal Reserve will be printing dollars…

The US Federal Reverse has made crystal clear that it wants unemployment to drop to 6.5 percent, and they’re still a long way form achieving that because job creation is slow. The Federal Reserve thinks it can help by injecting liquidity, so yes, it will have to keep pumping money into the economy.

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