Investment funds are a preferred tool for many small and medium-sized investors. They offer a viable alternative to the low returns offered by bank products, which have been at record lows for many years. In this regard, it's worth noting that the main bank products (fixed-term deposits, bonds, and high-yield savings accounts) barely exceed around 0,5%. This is a consequence of the lower cost of money, which has led to their profitability being at historic lows for several years now.
But in any case, decisions are almost always directed towards equity and fixed-income investment funds. These are the most well-known and where users' money flows are directed , to the detriment of other options. But it's important to remember that there's more to investment than these models within the funds themselves. To help you explore new business opportunities, we're going to introduce you to another type of investment fund that you can subscribe to right now. They could very well help you out of a tight spot in the coming months.
Many of these investment funds are quite traditional, but others will certainly surprise you with their originality and even the financial assets they include in their portfolios. The goal is to allow you to make your savings grow beyond the returns offered by bank products. In any case, one thing you must understand from this point forward is that these savings products do not guarantee any fixed return. On the contrary, it will depend on the performance of the financial markets.
Distribution by financial assets
Regarding its investment portfolio, it should be noted that the assets under management by category of collective investment schemes (CIS) worldwide at the end of 2018 were distributed as follows: equity funds represented 45,4%, fixed income funds 20,5%, mixed funds 12,5%, money market funds 11,9%, real estate funds 1,6%, and the remainder 8,0%. Assets invested in ETFs worldwide increased again, reaching €4,4 trillion in September 2018, up from €3,87 trillion in December of the previous year. Of these, 80% were equity funds and 16% were fixed income funds.
Net subscriptions through 2018 totaled €791.308 billion (€153.401 billion in the third quarter), down from €1,81 trillion in the same period of 2017. Of the total net subscriptions to collective investment schemes (CIS) through September 2018, 36,7% corresponded to European CIS. By country, the US saw €276.477 billion in net inflows (34,9% of the global total for the year), primarily concentrated in fixed income and equity CIS.
Investment funds: monetary
This is one of the quintessential traditional models in the investment landscape, although its profitability to date has been minimal, with intermediation margins of only a few tenths of a percentage point at best. This refers to euro-based investment funds, which are the most stable product, less affected by market instability and perhaps even less volatile than equity investment funds.
The volatility in financial markets over the past few months has once again negatively impacted the performance of investment funds in November. As a result, the total assets under management of these funds fell by €1.382 billion in November, reaching €265.140 billion, a 0,5% decrease compared to October. However, despite the overall market performance in 2018, investment fund assets have grown by €2.017 billion, a 0,8% increase compared to the end of 2017.
Guaranteed funds
Within this class of products aimed at more traditional investments, it's important to remember that guaranteed funds play a crucial role among small and medium-sized investors. The reason is simple: they are the only funds that guarantee a fixed return every year. Furthermore, it's worth noting that guaranteed funds led the ranking of net subscriptions in November with €252 million, bringing their year-to-date total to €266 million.
These types of investment funds offer greater security to small and medium-sized investors, partly because preserving invested capital takes precedence over other considerations. For example, they offer increased profitability and are more popular among investors in our country. In any case, it's also important to note that these investment funds are primarily characterized by their low volatility.
Socially responsible funds
They are largely unknown to investors, even though they can be just as profitable as other types of investments. However, there is a key difference: this atypical approach is based on selecting different criteria to build the portfolio. Specifically, it considers environmental, social, and corporate governance factors , among other investment models. The great advantage of these products is that they allow investors to align their beliefs or their way of life with their values.
On the other hand, so-called socially responsible funds are being marketed more frequently by asset managers. One example is the BBVA Sustainable fund, aimed at conservative investors and managed according to SRI criteria, which completes the range of socially responsible funds. Another option is the Sustainable Future fund, a global asset allocation fund that invests in government bonds, credit, and equities, applying ESG criteria to both governments and companies.
Based on volatility
It's common knowledge that last year wasn't very positive for the investment fund sector, which ended in the red. This was true across all types of funds, whether equity, fixed income, or even alternative investment models. If this year is the same, a solution could come from another type of investment fund, less well-known to small and medium-sized investors, such as volatility-based funds. These could even be the most profitable option in the current market conditions.
In this sense, the more volatile the equity markets, the better these specialized investment funds will perform. A small portion of our available capital can be allocated to opening positions in these unique financial assets , aiming to improve our bottom line from this point forward. However, it's also true that these operations carry a higher risk, requiring close monitoring of our positions. This could even lead to the need to transfer our holdings to another type of investment fund.
Real estate funds
Now might be the time to reinvest in real estate and profit from these types of transactions in the financial markets. Indeed, these transactions have grown by 13% in the past year, although slight variations are possible from now on. In this regard, various studies and industry reports indicate that housing prices will rise in 2019, from the current price of €1.650 per square meter to around €1.800 per square meter.
In any case, it seems a less intense deviation than that generated in previous years. Now what will have to be checked is whether this year will produce a turning point in the purchase and sale of homes. In this sense, there are a good number of investment funds that are specialized in this important sector of the Spanish economy. Although they have commissions that are stronger than in the other investment models.
On the other hand, it is also possible to combine this strategy with other financial assets, both from equities and fixed income. As a formula to diversify investments in the event that instability is permanently installed in the financial markets. In this way, there is no doubt that you will be protecting your savings in a more correct and effective way. Beyond other technical considerations and maybe also from the point of view of its fundamentals. In any case, it will be another of the models in investment funds that will have to be taken into account in this year that presents itself with many doubts.
In this sense, different studies and reports from the sector suggest that in 2019 housing prices will rise, going from 1.650 euros per square meter that is currently being traded to about 1.800 euros per square meter.