The aggressive lowering of rates which starred the Central Bank in tandem with the national Treasury made some of the favorite investments of retail savers, such as deposits fixed termthe paid accounts of digital wallets and the “fixed-term” common funds see their returns fall. In this context, and in response to clients’ search for better results, mutual fund managers developed a new product that seeks to take advantage of the rate differential that exists today between the yield paid by the monetary authority to the banks and the one that offers the Treasury for its Lecap bills.
The new ones T+0 mutual funds that invest in Lecap They are beginning to gain popularity in the Argentine financial market as a profitable alternative for savers seeking to maximize their returns in pesos. Although there are still few funds of this type available, their attractiveness lies in the combination of high liquidity and returns higher than those offered by traditional instruments such as fixed-term funds. However, it is crucial to understand how they work and be aware of the associated risks, since, although they promise high rates, investing in Lecap carries risks related to the Government’s payment capacity and the volatility of the prices of these securities.
The appearance of the new T+0 mutual funds responds to the need to offer attractive alternatives in a scenario of low interest rates. Since December of last year, the Central Bank has successively cut interest rates, which affected the returns of investment instruments in pesos widely used by Argentines, such as fixed terms and money market funds from digital wallets. With rates plummeting from 130% annual nominal in December 2023 to 40% in May 2024, these instruments no longer offer inflation-beating returns.
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The reduction of the interest rates led banks to adjust the returns on fixed terms, placing them around 30% annually. This situation left savers and companies looking for more profitable alternatives for their excess liquidity. In response, stock exchange companies began to structure T+0 funds, which invest mainly in Treasury Capitalization Bills (Lecap), instruments that offer substantially higher returns, close to 50% annually for the shortest tranches.
The money market funds, which have historically been a popular option for short-term investment due to their immediate liquidity, also lost appeal in this new context of low rates. The drop in rates and the obligation to maintain a significant percentage of the money deposited reduced their returns below the fixed terms. This caused a migration of funds towards the new FCI T+0, which not only promise better rates but also the possibility of redeeming the money on the same day, after the market closes.
“They are not funds to use like a traditional T+0, in which we put money for a couple of days (…) It is a fund in which we need to stay 3 or 4 weeks”
These changes in the investment landscape have prompted small savers and companies to consider the new T+0 funds as a viable alternative to maximize their returns in pesos. By offering rates ranging between 42% and 55% per year, these funds not only greatly exceed bank yields, but also allow access to liquidity quickly and efficiently, meeting the demand for higher profitability without compromising security. of your investments.
The new T+0 mutual funds have become an attractive option in the Argentine financial market, especially in a context of low interest rates and insufficient traditional returns in the face of inflation. These funds allow investors to access their funds with immediate liquidity, meaning they can withdraw their money at the close of the market. This makes them an ideal alternative for those who need quick liquidity without sacrificing competitive returns.
These financial instruments invest mainly in Capitalization Letters (Lecaps) issued by the National Treasury, which offer higher rates of return than traditional fixed terms. With returns that range between 42% and 55% nominal annual, these funds far exceed the 30% that most banks currently offer for fixed terms. In addition, the possibility of redeeming the money at the close of trading provides flexibility that is not found in other short-term investment options.
Diversification in Lecaps and other immediate liquidity instruments allows these funds to maintain a conservative risk profile, suitable for investors seeking to maximize their returns without assuming significant risks. The structure of these funds also makes them accessible to small investors, with minimum investments starting at $1,000, which democratizes access to higher returns compared to traditional banking products.
Although it is a product that invests in the short term and is very liquid, it has some risks. The main one is that the Government does not pay the Lecap, something that happened in the 2019 market crisis, in the midst of the exchange rate stampede after the electoral victory of Kirchnerism.
Another risk is linked to changes in the price of Lecap, which may suffer a drop in price, driving down the value of the share. This is a very limited risk, but it exists.
In 2019, Mercado Pago had tied its common investment fund to Treasury debt issues. The collapse in the prices of those securities caused the fund to show losses during a trading session. Cents of loss. But cents that are very difficult to explain to the mass public targeted by the Argentine unicorn. The digital wallet has since changed the type of fund it invests in.
“They are not funds to be used like a traditional T+0, in which we put money for a couple of days, even if it has immediate liquidity. In a month, for example, Lecap may have a couple of days off. It is a fund in which we need to stay for 3 or 4 weeks,” said a portfolio manager.
Below we give some examples of T+0 funds recently launched to take advantage of the higher rate paid by the Treasury.
Performance Fund II (Balanz)
- Issuer: Balanz Management Company of Common Investment Funds (SGFCI)
- Current IRR: 44%
- Duration: 40 days
Max Capital T+0 Fund
- Issuer: Max Capital
- Investment: 80% in Lecap and the rest in extremely liquid instruments
- Current IRR: Not specified
SBS Pesos Plus FCI Fund
- Issuer: SBS Group
- Current IRR: 42%
- Duration: Not specified
Balanced Quinquela Lecaps (MegaQM)
- Issuer: MegaQM
- Current IRR: 55%
- Duration: 45 days
Adcap Lecaps 100% Balanced XVI
- Issuer: Adcap
- Current IRR: 44%
- Duration: 36 days
