2019: what was the profitability for the client of the investment funds?

We have already said goodbye to 2019 and in January we are seeing the profitability rankings of investment funds in the different media.

The question is whether the profitability that the investment fund has obtained each year is actually what the clients have obtained. The answer would be affirmative for all those clients who remain stable in investment funds, respecting the time horizon they have set for their investments. But, if we analyze it with a certain perspective, of at least two years, we see that the behavior of the clients is not as rational as at first one might think.

Let’s remember 2018, a difficult year, with the markets in clear decline. We ended the year with an average return for all investment funds of -4.81%, with widespread losses in all categories, from short-term fixed-income funds to pure equity funds.

By reimbursing in hard times, later recoveries are lost

The other side of the coin is found in the evolution of 2019, with generalized positive returns in all assets and fund categories, some of them higher than 20%. According to the latest data available, an average return of more than 7% has been achieved, which makes this year one of the best in terms of accumulated return in the historical series that we manage.

And in this environment, how have customers behaved? We can analyze it with the data of subscriptions and refunds.

At the end of 2018, and given this negative market environment, customers opted in the last four months of the year to repay more than 3,800 million euros in the sector as a whole, which cut short the excellent performance of subscriptions from previous years . And this trend for the industry as a whole has continued in 2019, which has only managed to close the year with a meager 750 million euros of net inflows, despite the good performance of returns.

With these data, we can intuit that many clients suffered the valuation cuts in their portfolios in 2018 and did not enjoy their significant recovery in 2019. Hence the differentiation between the profitability of each fund and that actually obtained by clients, who tend to repay in difficult market moments, assuming the risk of not participating in subsequent recoveries.

For this reason, the professional advice that each entity offers its clients and respect for the time horizon that we set ourselves at the time of planning our investments is important.