from the commissions to how to look at the history


It is often said that past returns do not guarantee they cannot be a guarantee of future returns, but if we know how to analyze an investment fund, we can learn to search and discriminate, to make better investment decisions, which can increase the chances of getting it right. the financial product.

There are a number of parameters that serve to analyze an investment fund. In this case we will focus on the most important ones. The cost of the product that affects our assets and parameters of profitability and risk.


The real bottom line costs and the importance of the class

The simplified brochure of the Investment Fund we tend to see two main commissions: the deposit fee and the management fee. However, that does not mean that they are the costs that the investment product supports and therefore that they reduce the final profitability of the investor.

We can see it in the following example of the Caixabank Bolsa Gestion EspaƱa fund, FI Standard Class Risk Level C. In this case, we are shown that the management fee is 2.20% and the deposit fee is 0.125%. With these data we could think that the loss of our patrimony for acquiring this product would be 2,325 percentage points.

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This figure reflects a partial truth … and that is that there are more costs that the product bears and they go against the managed assets. Among these costs we have the administration, audit, transaction costs and all those impacted on the net asset value of the fund. In this case and for this product, current expenses or TER (total expansive ratio) amount to 2.39%.

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We have mentioned that this was the Standard class … but there are more classes, in this case the Plus class and the Premium class are added with a total running costs of 1.70% and 1.27% respectively.

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This happens because, in the case of the Standard Class, the minimum initial investment amounts to 600 euros. On the contrary, in For the Plus and Premium classes, the minimum initial investment is 50,000 and 300,000 euros respectively.

But there is more … The data provided does not collect the information on the commissions that it indirectly supports. the class of participation as a consequence, in this case, of the investment in other collective investment institutions.

We therefore turn to the brochure “commissions and expenses of the corresponding class”, the Standard Class. And here we see the truth of the product, if we add the costs of the product and the payment to third parties **, we go to ** costs on equity of 3.48%. In other words, we invest 10,000 euros and, at a constant net asset value, each year we would pay 348 euros for this product.

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Commissions should not be ignored in their long-term impact. Ten years this commission would consume 34.7% of the managed assets.

Enender your history with your most important metrics

Another of the most important points of the fund is how it has behaved in its history. To do this, we must look at three aspects: Alpha, Beta and Ratio Sharpe.

First of all, we have alpha that marks the excess return obtained from the fund compared to its reference index or benchmark. Good mutual funds are those that consistently do better than their goal. If a fund does not generate alpha, the existing alternative if we want exposure to a certain selective stock market, should be an ETF or index fund that replicates the benchmark index, with substantially lower commissions.

Then we have Beta, a measure of the sensitivity of the investment fund to the movement of a benchmark index. It is used to check how stable a fund is when markets are volatile.

If the Beta is 1, the fund is just as volatile as the index and shows the same variation as the benchmark. If it is more than 1, it suggests that the value of the fund is moving more sharply compared to the benchmark.. If beta is less than 1, it means that the change in the value of the fund is less compared to the benchmark.

What is Stock Beta and how can it be used to assess risk?

From here, we can consider that the manager can beat the benchmark and generate alpha because it is greatly increasing the volatility of the product. That is why you have to filter, through risk-adjusted return, the Sharpe Ratio.

Sharpe’s relationship is the relationship between the return in excess of the risk-free rate for each unit of risk assumed (volatility). The higher the Sharpe index, the higher the risk-adjusted return and the manager will offer greater efficiency in investment decisions.


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