Unregistered mutual fund advisers have their days numbered. The technical guide published last week by the National Securities Market Commission (CNMV) It imposes a series of requirements to operate that make it almost impossible to maintain this figure. Several of the consultants involved acknowledge that they will have to find new formulas.
Investment funds are usually managed by one or more people who are on the payroll of the management company. Thus, the Santander Small Caps fund is managed by Lola Solana, an employee of Santander Asset Management. This is the most common format.
In some cases, the fund management company has delegated the investment policy to a securities company, such as the International Mixed Variable Income Index 75; or a Financial Advisory Company (EAF), such as the Alhaja Inversiones fund. In both cases, the management company is Renta 4, and it is the one who has to execute all the investment decisions and verify regulatory compliance, but the strategy of where and when to invest is set by the Indexa Capital securities company or the EAF Araceli de Frutos .
There is a third case of investment policy outsourcing in which this task is entrusted to a person or a company not supervised by the CNMV. According to calculations by the regulator, in Spain there are 92 unregulated investment vehicle advisers: 48 advise investment funds and 44, variable capital investment companies (sicavs).
The CNMV technical guide requires these “non-professional external advisers” to prove their “good repute, qualification, capacity and sufficiency of means to carry out their advisory activity”.
- Andromeda. The Andromeda Value fund is managed by Renta 4 and advised by Flavio Muñoz and Juan de Dios Gómez. Its profitability in recent years has been spectacular: a 14.2% average annual return in the last five years. Only in 2020 has it appreciated by 31%, thanks to its firm commitment to US technology companies.
- Numantia. Similarly, the Numantia Patrimonio Global fund is managed by Renta 4, but advised by Emerito Quintana. Its average annual profitability in the last three years has been 12.39%, well above the market average. The approach of this vehicle is based on the philosophy of investing in value, to buy firms that are undervalued.
Now the most controversial point is that the advisory activity “is required to be a secondary or accessory activity for the advisor in the context of his professional activities, not representing the remuneration that the main source of their income may obtain “.
For unregistered advisers, this requirement is meaningless. Asking that counseling is not your main activity detracts from your counseling. Furthermore, proving this aspect would imply having to provide the manager with personal bank and tax details.
“It doesn’t make sense. They want us to have a main job, and the advice is almost a hobby for us, which hurts the fund’s participants,” explains an advisor who has been setting the investment policy of a fund for four years.
According to all the consultants consulted, the only reasonable way out is to become an EAF. In fact, the EAF employers have directly requested the CNMV to prohibit this type of unregistered advisers. It has also requested permission for the EAF to have agents who can provide investment advisory services.