How many hours do you plan to sleep each night of your vacation? Is summer the best time of the year to allow yourself sleepless nights on account of your investments? If so, perhaps you have not been able to establish your sleep threshold to the ideal extent, which should be proof of that of the last few days. Only this week the so-called fear index, the one that measures the implicit volatility of the S&P 500, has shot up 50% above 18 points, at maximum levels not seen since May… and all due to the abrupt correction of the bags these days on account of the , the populism of British Prime Minister Boris Johnson or his teacher in the technique of hyperbolic dialectic, Donald Trump, who returned to China on Thursday.
European and American equity investment funds.
What is better then, to invest directly in the stock market or to do it through other products? If you know how to select the least volatile, investment funds offer an alternative with less risk and, practically, just as profitable. The twenty less volatile European equity funds register an average deviation (with respect to their average behavior during a reference period) of 10.4% over the last three years. Only in the last week the VStoxx, the selective one that measures volatility within the European stock market, has shot up almost 30%, up to 20 points, the highest in May. And the return obtained between those who have bought a EuroStoxx 50 ETF and those who have invested in the continental stock market through these funds does not differ much. The EuroStoxx 50 offers an annual return of 5.6% over the last three years, compared to 5.4%, on average, given by the selection of the 20 least volatile funds, according to data provided by Morningstar.
The return/risk equation of the US market is not as favorable for investment funds as in the case of the Old Continent, although it is still less volatile. On average, the 20 portfolios with the lowest volatility assume an average deviation (with respect to their historical average) of 12.7% in the three-year period.
The ‘Bestinver Grandes Compañías’ fund is the second least volatile and yields almost 6% per year in the three-year period
As for the return obtained, a fund investor has earned 10.6% per year compared to 13% that the S&P 500 has given annually. In both cases, the selection includes investment funds marketed in Spain, which invest in equities and which have at least three stars according to the Morningstar ranking. Does it make up for it, then, to earn a little less by assuming much less risk? Perhaps not if things, as in the past, are calm, but in the current situation the experts are clear that there are reasons to be nervous.
It is no longer just Donald Trump and all the problems he generates worldwide, mainly the trade war against China; but also the Brexit that has the day marked on the calendar to become effective: next October 31. And we must not forget that the agreement with Brussels is in the hands of a kamikaze like . “Another reason to remain vigilant with volatility is that expectations are no more than that, and we live in a very uncertain environment in which they could change rapidly,” they say from Deutsche Bank WM, where they also list the Fed among the reasons. The Federal Reserve decided this week to lower rates – by 0.25 basis points – as expected and as Donald Trump had also demanded. But what if he had won over the institution for years just by not going against the President of the White House? Bankinter analysts acknowledge that this is another of the situations that can generate volatility in the second half of the year. “Powell will have to work hard to get financial markets to realize that he is not going to cut at the slightest sign of volatility. The Federal Reserve must act only on economic data and nothing else,” suggests James McCann, economist. senior at Aberdeen Standard Investments.
Funds to ‘chill out’
The least volatile European equity fund, according to the selection made by elEconomista with data from Morningstar, is Santander Dividendo Europa, the only one in the table whose implied volatility is less than 9% -specifically, at 8.73%-, although it is also the least profitable, with 2.09% per year during the last three. This may be influenced by the fact that a quarter of the portfolio is invested in the financial sector. Although it is not present among the five largest positions in the fund: two of them are pharmaceuticals, Novartis and Roche, two tobacco companies, British American Tobacco and Imperial Brands, and the Swiss company Nestlé.
The second least volatile, Bestinver Grandes Compañías, offers one of the most attractive return-risk ratios in the selection. With a three-year annualized return of 5.95%, the volatility of the portfolio is 9.37%, compared to 16.4 for the Stoxx. Where do you invest? More than a third in the United Kingdom and, by sector, especially in cyclical consumption, with Informa, a British data and advertising firm, as the first position in the portfolio. In the year, accumulates a rise of 40% in the London Stock Exchange.
The volatility of US equity funds is somewhat higher. It is worth noting how low it is in the case of Renta 4 USA -only 6.68% over three years-, but 76.8% is invested in miniS&P futures. With a more normal volatility figure Caja Ingenieros Bolsa USA -11.2%- and an annualized return of 7%. It distributes its portfolio between 20% invested in technology -in firms such as Microsoft and Alphabet- and another 20 in cyclical consumption, where The Walt Disney stands out, whose revaluation in the year exceeds 30%.
And the Spanish funds?
In the last three years, the Ibex 35 has not even risen 8%, just over half of what the European stock market is revalued and a fifth of the gains of the New York S&P 500. With the bar so low, it has been relatively easier for Spanish funds focused on looking for small and mid-cap stocks to catch up with the behavior of the Ibex. The annualized return of the national selective in the last three years is 2.6%, compared to 4.9, on average, achieved by the twenty Spanish stock funds with the least volatility, according to Morningstar data. Overall, the deviation from the Ibex of these products is 10.4% in three years.
Spanish stock funds.
If what you are looking for is tranquility, the least volatile fund of the selection of 20 is Santalucía Espabolsa, with 9.11% and five Morningstar stars. With a minimum investment of 1,000 euros you can participate in this vehicle that gives an annualized return of 4.08%. A quarter of its portfolio is invested in industrial companies, such as Talgo, which is its first position with almost 8%; followed by the Portuguese Sonae, Técnicas Reunidas, Prosegur Cash and Telefónica. A similar fund from the same manager, with almost the same companies and a little more volatility is Santalucía Ibérico Acciones, which doubles the profitability of its counterpart, with 8.83%.
Among the three less volatile funds, Bestinver Bolsa also stands out, whose three-year annualized return is 3.3% -with a management fee of 1.75-, and Magallanes Iberian Equity, which contributes 5.62% – for, also, 1.75% for management-. The first portfolio, managed by Ricardo Cañete, had almost 43% invested in industrial companies at the end of June, among which two Portuguese companies Semapa and Galp stand out, in addition to ACS, while another 20% is allocated to finance, with Unicaja, Merlin Properties and Santander as outstanding titles. It is also fair to recognize that Bestinver Bolsa is the third fund in this category with the highest net worth behind Santander Small Caps, by Lola Solana, and EDM-Inversión, by Alberto Fayos and Ricardo Vidal.
The Magallanes fund managed by Iván Martín has also wanted to focus on the industrial sector, which accounts for almost a quarter of its investments. It’s been just a year since Martin’s main value. Today it represents 6.2% of the 193 million that the fund has; followed by Inditex, the television and Internet company NOS, Repsol and Sonae. The Portuguese PSI 20 achieved a slight revaluation of 3.9% in the year, compared to 4.4% for the Ibex, after the fall of the last week.
Among the ten products with the least volatility, according to Morningstar, is also the fund managed by Gonzalo Sánchez, Gesconsult Renta Variable, which achieves 8% per year for its participants in three years. Its management commission is 2.25%. Sánchez’s bet is focused on two firms with the same origin, Dominion and Cie Automotive -also includes Gestamp among the top ten positions-, where it has 15.54%, followed by Grifols, Cellnex Telecom and the Portuguese Navigator, comparable to Ence of the paper sector.
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