The advantages of Fondtesoro are firstly those of any mutual fund:
1. They allow investors to enjoy professional management of their savings and to diversify their portfolio
Although investors could also diversify their portfolios by purchasing many different Treasury securities, this approach would entail high costs and would only be profitable for large portfolios. By contrast, Fondtesoro allows investors, and even those who invest relatively small amounts of money, to purchase a share of all Treasury securities held by the Fondtesoro in its portfolio as well as,a share in private fixed-income and variable-income securities. This may benefit investors in two different ways::
In the case of Bonos and Obligaciones del Estado (Government Bonds), a well-diversified portfolio tends to display a market value less sensitive to fluctuations in interest rates than Bonos and Obligaciones del Estado individually considered.
In the case of Letras del Tesoro (Treasury Bills), there is a second advantage: while an individual investor needs EUR1,000 in order to purchase one Letra, only EUR 300,51 or less are required to buy a share in a Fondtesoro .
In the case of the Fondtesoro Plus, few instruments so effectively combine returns and liquidity, guaranteeing enhanced portfolio diversification with easily redeemable small-size holdings .
2. The fiscal advantages of mutual funds
Fondtesoro generate capital gains and losses at the moment in which they are transferred or the shares repaid. The part of the capital gains generated earlier than 20 January 2006 and derived from shares acquired before 31 December 1994 will be reduced by 14.28% for each year of continuance that exceeds two (1). For these purposes, the number of years of continuance will be understood as the number between the date of acquisition of the shares and the 31 December 1996, rounded up.
In 2015, the capital gains generated by the Fondtesoro are taxed at a rate of 20% up to the amount of € 6000, the bracket between € 6000 and € 50,000 is taxed at 22% and the bracket exceeding € 50,000 is taxed at 24%. Capital gains are subject to a withholding tax of 20%.
Furthermore, together with the above-mentioned advantages, which are common to any mutual fund, Fondtesoro offer some additional benefits related to the nature of the Treasury Securities in which Fondtesoro invest the larger part of their portfolio: (see Advantages of Treasury Securities).
On the other hand, there are other considerations common to any other mutual fund that must be taken into account. If compared to direct investment in Treasury Securities, two possible drawbacks should be noted :
- The commissions charged by Fondtesoro tend to be higher than those charged by an "Entidad Gestora" when it holds Treasury Securities in the investor’s name (although the investor obtains in exchange the benefits of diversifying his/her investment).
- The investor runs the risk of experiencing capital losses, basically in the case of long term Fondtesoro; the possibility of an investor incurring losses in a share of a long term Fondtesoro arises solely from changes in the market price of fixed-income securities, as a result of an increase in interest rates. Thus, compared to the alternative of direct investment in Treasury Securities and holding them to maturity, the situation would be the following :
When the investor purchases, for example, Government Bonds in an auction and holds them to maturity, he/she has the total certainty of collecting the amounts (coupons and principal) that those bonds entitle him/her to receive, so the investor does not run any risk.
Through a Fondtesoro, the investor acquires a share in a mutual fund at market prices When the investor asks for the share to be refunded, the amount received will be the market value of his/her share (i.e. the result of multipliying the percentage of the holding in the mutual fund by the market value of the fund's portfolio). When buying and selling at market prices, the risk of the sale price being lower than the purchase price (depending on the evolution of interest rates) must be considered; therefore, a loss or a lower than expected yield may result from the investment. On the other hand, if the sale price in the market is higher than the purchase price at which the share was acquired, then a higher than expected yield will be obtained.
(1) The reduction is limited to the portion of the profits corresponding to assets to which amortization coefficients would have been applied, transmitted from January 1, 2015, whose value does not exceed 400,000 euros.