Mixed funds are one of the broadest, most flexible and discretionary categories of investment funds available.
They could be classified as suitable for moderate profiles, but only within this category can funds be found for all tastes.
It is necessary to know what types of mixed funds exist, what characteristics they have and what average returns they are presenting. This information together with an adequate study of our risk profile as investors will open the way for us to choose a mixed fund wisely.
Let’s see how this financial product, due to its wide extension and room for manoeuvre granted to the manager, can be ideal for any type of saver.
However, it is necessary to fine-tune the shot before shooting and this is what we will learn today.
Mixed funds can be defined as those that combine both fixed and variable income portfolios in their portfolios.
We say”roughly speaking” because there are actually multiple subcategories within mixed funds, hence the problem of choosing one.
It is not as simple as simply combining the two types of assets, it is also necessary to decide in what proportion.
Objectives of the mixed funds
But let’s start at the beginning. A mixed fund was created to provide stability to an equity fund by including fixed income assets in its portfolio. In this way we create a product that is halfway between fixed income and equity funds, in terms of risk.
From another point of view, one might also think that the intention is to incorporate equities into a fixed-income portfolio in order to increase returns while maintaining an adjusted level of risk.
Which of the two visions is the right one? Is a mixed fund set up to protect a portfolio of equities or is it intended to increase the return on a portfolio of bonds?
The percentage of each of the two types of assets included in the fund’s portfolio can be used to determine the manager’s view of these issues.
In principle, it should be clear to us that a mixed fund is a category of investment funds. The categories were created jointly by the Comisión Nacional del Mercado de Valores and Inverco (Association of Collective Investment Institutions) to offer a criterion to savers and to be able to choose a tailor-made investment fund.
What the category of the fund indicates to us is the investment vocation.
In other words, the fund’s guidelines for deciding which assets to include in its portfolio and the percentages thereof.
The investment vocation defines the level of risk that the fund can assume and this information is very useful to fund managers.
Thus, a mixed fund will have more return and risk than a fixed income fund, but less than a variable income fund.
But this is all we need to know?
Of course not, of course not.
This information is very general, it does not indicate the percentage of each type of asset, and therefore, the manager’s vision, or the specific risk profile.
For this reason, different subcategories have been created within the universe of mixed funds.
Types of mixed funds
It should be noted that mixed funds are very flexible products. In reality, all investment funds are flexible products, this is one of their advantages. However, this category is characterized by being particularly ductile.
There is no fixed percentage to determine the types or subcategories. There are ranks and the fund manager has ample room for manoeuvre in setting his or her criteria for the strategy.
We should also point out that there are other factors for defining the categories of mixed funds. Depending on the geographical area in which the selected assets originate and the exposure to a particular currency, multiple rates are set.
According to Inverco, the categories are:
Mixed fixed income euro
Characterized by not being able to have a percentage of equity exposure greater than or equal to 30% of the total portfolio. They must also have an exposure to foreign currency assets of less than or equal to 30% of the total.
International mixed fixed income
They must have an equity exposure of less than 30% of the total portfolio, but have more than 30% in assets issued by entities located outside the euro area and denominated in foreign currency.
Euro mixed equities
They must have a percentage of equity in their portfolio of between 30% and 75% (inclusive). They cannot have more than 30% exposure to assets issued in currencies other than the euro.
The distribution of the portfolio is the same as for mixed euro equities, but in this case they can have a percentage of exposure.