Two-thirds of the money has vanished from highs and funds have been closed due to poor returns. It’s time to look at the bags from abroad.

Two-thirds of the money has vanished from highs and funds have been closed due to poor returns.  It’s time to look at the bags from abroad.

Two-thirds of the money has vanished from highs and funds have been closed due to poor returns. It’s time to look at the bags from abroad.

A group of 'traders' in full stock market panic.

Spanish stock exchange funds are in decline. The ibex loses steam, always lagging behind the European floors. And his disconnection with investors may already be irreversible. A host of factors aggravates its continued decline, from the bad results until the greater financial education of savers locals, who are increasingly looking at the stock markets with a global focus.

The symptoms of exhaustion have been seen since 2019, when the funds that invest in Ibex 35, Continuous Market and small and medium-sized capitalized companies began to lose assets at a dizzying pace. They closed the year 2018 with 6,260 million euros, and today they manage just over 3,525 million. Nearly half the money is gone.

Worse is the comparison if it is made with his historical maximum, registered in 2006, moment in which these investment funds came to agglutinate almost 10,720 million, according to Inverco. From that peak of splendor, two-thirds of savings have been volatilized entrusted to the specialist managers of the Ibex.

The managers have taken note. Aware that, quite possibly, it is a losing battle, they have already begun to get these products out of the way.

Francisco García Paramés has closed his Iberian stock fund in Luxembourg due to lack of demand from international investors. The guru has merged it with the Cobas Large Cap Fund, exposed to large companies from around the world. However, it maintains the original version in Spain for customers who still have hope in their comeback.

Francisco García Paramés, in a file photo.

Francisco García Paramés, in a file photo.

Imantia Capital is another of the firms that have backed down. It has begun the process of merger by absorption not only of its Spanish and Portuguese stock market fund, but also of its European shares, by the thematic fund Imantia Futuro Healthy.

Some others have also taken similar steps. Since 2007, 26 funds have been closed of Spanish variable income -with domicile in Spain, not counting some individual items registered abroad-, up to the current 100.

Some benchmark managers have even had to turn their careers around, such as Alfonso de Gregorio and Lola Jaquotot, who in their signing for Finaccess Value have expanded their field of action from the Spanish stock market to international markets and fund selection .

Right now, 401,331 investors in Spain have Ibex funds, which represents 2.7% of the total participants in Spanish funds, which amount to 14.8 million, with data from the managers’ association.

poor returns

Until September, Spanish equity funds were up 11.88%, compared to the 4.40% average for the sector so far this year.

If the yields are annualized, at three years they have given -0.93%, weighed down by the Covid-19 crisis; at five years, 3.04%; in a decade, 4.84%, and in the last 25 years, the longest term, its return year after year has been 5.19%.

This year, the first place in the ranking is disputed Cobas Iberia, from ParamésY Hours Value Iberia, by Javier Ruiz, Alejandro Martín and Miguel Rodríguez, both up about 25%, according to Morningstar. But perhaps they are one of the few exceptions that confirm the rule.

Miguel Rodríguez, Javier Ruiz (Director of Investments) and Alejandro Martín, the management team of Horos AM.

Miguel Rodríguez, Javier Ruiz (Director of Investments) and Alejandro Martín, the management team of Horos AM.

Miguel CamiñaCEO of the digital financial advisor mycapitalrecognizes that they do not recommend Spanish stock funds to their clients for several reasons: “The first, for diversification. A Spanish investor is already sufficiently exposed to the evolution of Spain with his work, his house and the family economy so that their investments are also in Spain. On the other hand, we believe that there many opportunities outside of Spain that we can take advantage of”.

The truth is that returns, which is the first thing a saver who wants to invest looks at, back down. According to the report SPIVA prepared by S&P Dow Jones Indices, in the first half of 2021, only 48.24% of Spanish stock funds have beaten the reference index, in this case the S&P Spain BMI. Or, put the other way around, 51.76% of the funds that invest in the Ibex universe are being swept away by the index, which gives arguments to indexed or passive management.

Madrid Stock Exchange Palace.

Madrid Stock Exchange Palace.

Ten years later, the photo that SPIVA shows is devastating. Only 17.39% of Iberian equity funds did better than the index. It means that 82.61% are bad funds and do not add value to customers.

minor attraction

The discouragement is noticeable in the presentations of investment perspectives and market strategy. A few years ago, the first question from analysts and journalists was always which Spanish stocks the firm in question was invested in, which ones it recommended entering and which ones to avoid.

Also forecasts of the selective stock market, the Ibex 35. In fact, the chief economists, strategists, fund managers and stock market analysts always had a specific slide on the Spanish market prepared or made an aside.

But today’s meetings are far from that climate. There are hardly any questions about Spanish shares, except for very specific cases, and the managers dodge them when there are with a frequently repeated mantra: “The Spanish stock market gives for what it gives, the Ibex 35 is biased towards banks and electricity companies, we lack technology and innovation. An investor should look outside and have his portfolio in the United States, in emerging markets, in megatrends, etc.”

Wall St.

Wall St.

“If the Spanish stock market in the last ten years has not generated almost any profitability, while the rest of the world has had a very good behavior, it is normal that the managers themselves, in their eagerness to sell products with good historical behavior, show their international funds”, explains Camiña, from Micappital. In addition, “investors also pay more attention to the markets where there has been more profitability.”

Another reason is the increase in international funds that can be contracted from Spain. “What used to be almost exclusive to private banking clients is now easily accessible to any investor regardless of their wealth.” Finally, this adviser believes that there is an evolution in financial education in Spain, which “looks beyond our borders when it comes to investing your savings.”

the key question

Everything seems to indicate that the decline of the Spanish stock market funds has no remedy. Unless the Ibex gets its act together in a short space of time. In Camiña’s opinion, “It is not irreversible, but we are never going to return to the situation of 20 years ago, where the Spaniards had all their investments in shares or Spanish stock funds”.

As he foresees, “it will depend to a great extent on the evolution of the Ibex and on whether we are capable of regenerate the index with new high-growth companies that they update it as it happens in other markets”.

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