The market of investment funds will benefit from the reduction of interest ratesimproving its profitability and attracting greater capital from the banksstated the executive president of the Dominican Association of Administrators of Investment Funds (Adosafi), Santiago Sicard.
He explained that the open fundswhich especially invest in fixed income such as bonds from the Central Bank or the Ministry of Finance, tend to appreciate and present better returns when the interest rates they go down
“To the extent that the market rates go downwhen one is already invested, those securities appreciate, they take on a higher price. And this is reflected as better profitability for open funds. The longer the term in which I am invested, the more it will revalue in the face of a drop in the interest rate, but if it is a very short-term security, it will not revalue as much,” he said.
At the end of July, some open investment funds in pesos recorded rates of return greater than 11% and 12% in the last 180 days, while those denominated in dollars showed returns from 2.58% to 4.66%, according to the statistical bulletin of the Adosafi.
In the case of the closed funds, which are those who invest in productive projects, the owner of the Adosafi He maintained that these also have “a very good advantage” from the investor’s perspective, because when finding financing rates Lower rates tend to pay less interest and profitability usually tends to improve.
Recently the Dominican Central Bank (BCRD) cut its monetary policy rate by 25 basis points, taking it from 5.75% to 5.50% annuallyafter the US Federal Reserve did the same with the purpose of encouraging job creation in that nation.
Withdrawal of banks
The executive revealed that the investors They constantly monitor the bank feesensuring that as the Central Bank reduces the active interest rate, this drop is also transferred to term deposits, which leads them to withdraw money from these entities to invest in the funds.
“In the short term, the dominican investorEven though we don’t want it, it is constantly comparing profitability. So, that effect on the investment funds leads to the appreciation of the securities in which the investment fund has invested and, therefore, this is reflected as a better profitability for an investor,” he said.
Santiago Sicard described the situation as cyclicalindicating that in 2022 the sector “experienced the opposite”, with the outflow of capital from the investment funds towards the banks.
