Sunday, October 2

In equities, indexing works very well but in fixed income it does not work so well

– What is the reason for the rise of indexed management? What advantages and disadvantages does it present?

When you choose a fund you have three decisions to make: the index; the management style of the manager or manager, that is, understanding what he does and how he does it and, lastly, understanding whether commissions really add value. The advantage or the reason that explains why indexed management likes a lot is because of these three decisions it eliminates two, the strategy is to replicate the index there is no complex strategy to understand and the commissions we know that you are going to pay little and do not expect anything in return , you don’t expect the manager to do better than the index. This is very attractive because of three decisions you only have one left: choose the index.

– One of the advantages is their low commissions and the profitability that they can offer if the index to follow is chosen well … Do you think that the selection of the indices is vital?

Yes Yes. Indexed management gives you more control but at the same time you have more responsibility, you have to choose the index and the distribution of assets well as more fixed income or variable income. We have a showcase of about 200 index funds on MyInvestor, are they all going to do it right? I do not know, what I know is that the commissions are going to be low and the deviation with respect to its reference index is going to be low, but how each index is going to do it I do not know, for example the US stock index has risen by a 30% this year, while the Japanese stock index has not risen because it is at 0%. The same in fixed income there are some corporate fixed income indices have risen 7%, while some sovereign fixed income indices have lost 3%. Ultimately you have the control of choosing the index, but also the responsibility of choosing the index.

– Does it work equally well for fixed income and for more conservative investment profiles?

I think not, in equities indexation works very well but in fixed income it does not work so well. The reason is that fixed income is very heterogeneous, there is high-quality short-term fixed income that has little risk and then there are low-quality corporate bonds that have a lot of risk, it is a field, as I said, very heterogeneous. If you choose an index and a fixed income fund of high quality in the short term, what I can guarantee you is that you will lose money given the interest rates today, while if you go to a more flexible management and leave the manager or manager that distributes the risk the same wins or loses the same, but at least I am not insured the loss.

– The robadvisors are also gaining ground … what does it mean compared to traditional advice?

What robadvisors solve is the third of the decisions we were talking about: selection of the index and distribution of assets between fixed income and equities and that is why they are arousing a lot of interest. Compared to a normal advisor who also solves the same problem, a robadvisor is more efficient and charges less commissions as a result, that satisfies many people and in fact I think that people understand it, if I can do it online and without need going to see a person is going to be cheaper. That works for a lot of people, maybe younger people, who are versed in new technologies, whereas more traditional or older people still like traditional advice and that’s fine. There is room for both types of advice.

– Pension plans seem to lose their attractiveness after the regulatory change. What does MyInvestor offer in this regard?

You are right because the maximum that could be contributed until last year was 8,000 euros per year to pension plans, this year it is 2,000 euros per year what I can contribute to individual pension plans and in 2022 it will be 1,500 euros per year. The amount to be deducted decreases but the attractiveness of the product remains the same because there are very few products in Spain that allow it to be deducted and this is one of them. That said, there has been a lot of innovation in the field of plans and the pension plan that two years ago was the most efficient today is surely no longer so. Since transferring plans is not taxable in MyInvestor we have the largest plan platform so that you can transfer the one that is most suitable for you, we are committed to an open architecture, a lot of management companies and if the plan is not there we add it. Clients asked us to launch pension plans with low commissions and we also did that in 2020. We have the only plan indexed to global equities that exists in Spain and the cheapest indexed to the US stock market, which has been an offer that has come at the request of customers. If we look at Morningstar, both plans have performed very well, they are the best in their category. Therefore, open architecture and the launch of good quality products in relation to their price.

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