Contenido

FondTesoro (mutual funds in Treasury Securities)

 

 

•   
• Advantages
• Features
• Types of Fondtesoro
• Commissions
• Points of sale

 

•  The advantages of Fondtesoro are firstly those of any mutual fund:
  
  
• 1.  They allow investors to enjoy a 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; in contrast, Fondtesoro allow investors, and even those who invest a relatively small amount 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, in the case of the new categories of Fondtesoro. This may favour the investor 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 300,51or less are required to buy a share in a Fondtesoro.
•  In the case of the Fondtesoro Plus, it is true to say that 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
  
  
• The Fondtesoros generate capital gains and losses at the moment when 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. 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.
  
  Capital gains are subject to a tax retention of 19% and will be taxed at the savings income rate (19%)*.
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•  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: security and liquidity (see Advantages of Treasury Securities).
  
  
•  On the other hand, there are other considerations which are common to any other mutual fund. If compared to direct investment in Treasury Securities, two possible drawbacks may be mentioned:
  
  
• - The commissions charged by Fondtesoro tend to be higher than those charged by an "Entidad Gestora" when it holds Treasury Securities on the account of the investor (although the investor obtains in exchange the benefits of diversifying his/her investment).
  
  
  
• - The investor runs the risk of having capital losses, basically in the case of Fondtesoro FIM; the possibility of an investor incurring losses in a share in a Fondtesoro FIM 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.

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* The rate of 21% will be taxed on the taxable base which exceeds 6,000 euros.