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Time for Spanish equities? Small caps funds

On May it was the turn of the National Variable Income, a category that beats its referents when achieving profitability 2.82%, the highest of the month compared to other categories and with this, it reaches a profitability of 12.74% so far this year, followed by International Equities with 10.31%. Double-digit profitability and that could go to more if the arrival of the resources of the Recovery Plan for Europe Next Generation materializes.

Investor appetite is booming according to the flows of the month, with net subscriptions of almost € 2 billion and that represent 85% of the monthly increase of the patrimony. With this, so far in the second quarter the flows would be around 4,130 million euros, pointing (in the absence of a month) to be able to be best second quarter since 2017, although at a slower rate than that achieved in the first quarter. If we take into account the accumulated inflows in the year, they are already close to 11,000 million euros, a figure not seen in 2015.

Investors look back at Fixed Income

Fixed Income is still the leading category by equity share (with 25%) and it is the one with the highest monthly variation in absolute terms (1,124 million euros) and the third in relative terms after national equities and absolute return. It is also the category leader in May by net subscriptions with almost 1,073 million euros, which means that even though the category’s profitability in May was marginally negative, the investor is changing his asset allocation due both to the strong performance that equities have had after the pandemic, as well as a potential rebound in interest rates that would favor short-duration positions.

Guaranteed, monetary and passively managed funds were the only three categories that registered net outflows, totaling 672 million euros.

Time for National Equities?

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Regarding Variable Income, the international one registered a monthly increase of 1% in assets, explained in 75% by net inflows of flows and the rest is due to the market effect; The opposite is the case in the National RV where only 34.5% of the monthly growth in equity comes from new flows.

Of the more than 60 equity funds in Spain that are marketed in our country, there is only one that exceeds 500 million euros, four that exceed 200 million and ten that exceed 100 million. There are twelve funds with a net worth of less than 10 million euros, and a large number of funds whose net worth is between 11 million and 90 million.

Among the 10 largest funds by equity there are only two funds that register positive flows so far this year, the Santander Spanish Stocks (slightly more than 81.2 million euros, its best month having been March – according to Morningstar data) and the Caixabank Master RV Spain (about 149 million euros, where all the months have been net subscriptions). Of the rest, Santander Small Caps Spain is affected by the magnitude of negative flows (42.3 million euros) and the Santalucía Espabolsa (around 20 million), not having registered any month with positive flows.

As can be seen in the table above, Spain’s small & mid caps funds have lagged behind so far this year. However, we consider them to be the most attractive funds given the prospect of a cyclical European recovery. Despite the inflation fears revived by the words of the Fed on Wednesday, we consider it appropriate to position ourselves in these assets with such a reduced follow-up by analysts. We especially like the Santander Small Caps, managed by Lola Solana, which has shown permanence over time not only of the fund but also of the manager itself, with an adequate reward for its participants in the long term.

We are committed to the National Variable Income, mainly for the small caps that have lagged somewhat behind in this rally and we believe that it would be a great opportunity to position ourselves in the asset, always considering the long term.

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