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Making extra cash count: banks' innovations encourage everyday people to take stock of investment funds.

Not so long ago, investment funds were the "get rich quick" tools of the affluent. Portfolios were needed, accountants required and a fat wallet was a must. More often than not, it was the large corporations that invested in such funds, often administered from anonymous offices in Switzerland or the Cayman Islands.


Investment funds seemed a long way from the people on the streel who struggle to place the leftovers from their salaries into a savings account.

But there has been a significant change in the philosophies of the banks and financial institutions. Now they are targeting Jane and Joe Normal as the next reservoir of recruitment to swell the ranks of investment funders. At long last, the financiers have brought investment funds into the reach of the ordinary man and woman.

Now, for as little as US$100, anyone can place a stake in investment funds, use modern technology such as computers, telephones and faxes to keep track of their investment and watch their money grow.

There has been a sea change in saving and investing in Mexico, according to Julian Varela, director of Investment Fund Products at HSBC Mexico. Investment funds have become a hot issue for everyone, not only the rich and big corporations.

"In the past, not too many Mexicans saved their money in a bank or invested in stocks and shares or mutual funds," he said. "Now, investment funds are available to everyone and it is catching on in a big way. We have had a significant rise in the number of investors since our new investment funds scheme was introduced."

It is a development that has excited the banking and financial community. Manuel Armendariz, general director of American Express Bank in Mexico, has no doubt that this is an excellent opportunity for anyone with spare cash to take advantage of.

In an outburst of pep seldom heard from a financial guru, he enthused: "American Express has its own excellent investment fund program but I would urge people to take advantage of any chance of getting into investment funds. Use our scheme, by all means, but even if you don't want to use our program, buy into investment funds through any scheme. Just get into them, that is the important thing."


So, why is everyone talking about investment funds?

The concept behind such funds is simple. When the savings of the investors are added, a bigger sum of capital is available to be invested in different funds. Due to the fact that different funds respond to different conditions, a diversified portfolio is less exposed to negative variations in prices.

Investments are also diversified based on portfolio distribution, placing them in different value groups such as stocks, bonds, exchange coverage, short term investment in the money market or through maintaining positions in different industries or sectors such as commerce, services and construction. Under normal conditions, an impressive savings account would be required to conform a portfolio with such possibilities. However, even a small investment in a fund allows you to be perfectly diversified and exposed to fewer risks than in the investment of a single value.

HSBC hold the fifth place in funds administration in Mexico with a share market of six percent. The bank handles activities of more than 2.7 billion pesos, with more than 60,000 investors.

And few of the new investors are financial experts--the banks handle that for them. After studying the financial and market information, HSBC's people responsible for portfolio administration select the investments that best suit the fund objectives. The professional administration of your investment means that you do not need to be involved in the daily decision-making or require a detailed financial analysis.

Over the course of its short, 19-month life, HSBC-D2 has become the biggest fund in Mexico of its kind. Its value has risen from less than 200 million pesos and 869 clients to more than 16.7 billion pesos and over 32,000 clients.

Few investment funds offer so much for so little. HSBC-D2 is accessible to everyone because administrators of the investment portfolio are experts, the funds in which they invest are of the best quality, with a very short term investment horizon and with an AA/1 qualification (banking, governmental and private), which means they have a minimal risk. This fund has given profits close to 9 percent in a year.

The HSBC Family Fund, too, has grown considerably since its birth almost three years ago. The variety of offers has expanded to offer a wide range of investment options to both individuals and companies.

All HSBC funds can be operated through a personal connection or through telephone in the Stock Market Attention Center. But it is enough to open a contract in a branch and invest to become an investor in the bank's funds.

"In the past, you needed US$1,000 but we lowered that figure to US$100," said Varela of HSBC Mexico. "That was one of the decisions we took about two years ago. We wanted mutual funds to become a retail product. That became our strategy and we have been very successful."

Accessibility is further amplified by HSBC's low-risk investment concept. "We have linked it to a checking account, so all that you don't need today, you can access tomorrow," said Varela. "The client can make between 7 and 8.5 percent profit.

"Our strategy means that if you see the market conditions changing, we will offer you a portfolio and once the market is behaving badly, you can have your money in weekly, monthly or longer-term installments," he said.


HSBC is not the only option. Bancomer also has an interesting--and growing--choice of investment funds.

The bank's funds market in Mexico hit a value of 4.74 billion pesos in October. The growth within the year has been nothing short of spectacular. It has increased its value by 20.4 percent in 10 months. The number of clients has surpassed a million and Bancomer continues as a leader in market funds, attracting 19 billion pesos a year.

The database of Bancomer clients continues to grow: As of October 2005, more than 300,000 people had decided to invest in Bancomer funds, representing 28 percent of the market share. Bancomer launched two new, innovative funds this year.

First, the Salary Fund (Fondo Nomina). The first type of this fund in its class, it gives the facility of investing in a fund from 3,000 pesos upwards. The client has daily liquidity and through the simple act of investing in the fund and maintaining a balance of 3,000 pesos the client has, in the event of losing his job, an unemployment insurance that, depending on the saved amount, could reach 30,000 pesos.

Furthermore, he has the possibility of receiving a credit card. This product is only for clients that receive their pay check through Bancomer.


Then there is the Triple Stock Fund (Fondo Triple Bolsa), through which a client can participate in a small bit of the Mexican stock market price index while maintaining guaranteed capital and insured profit. Jorge Perez Samano, director of Asset Management at Bancomer, said: "In this way, the client can participate in the stock market without risk. This fund is available from 20,000 pesos and has a semester liquidity."

Gestion Santander Mexico (GSM) is one of Mexico's leading asset management firms, solely dedicated to mutual fund management. With more than US$7,600 million in assets as of October 31, 2005, GSM is the second largest asset management company in Mexico.

Leading Mexico's mutual fund product market, GSM offers the largest diversified family of funds in the country, 30 fixed income funds and 15 equity funds, including the only NASDAQ-100[R] indexed fund in Mexico. According to Luis Cardenas, director of Commercial Products of GSM, with this wide range of products, the company offers its clients the opportunity to diversify and optimize their investments.

Within this family, GSM offers the only free asset management allocation funds in the country. These funds can adapt freely investing its assets along the whole yield curve, protecting from adverse economic environment and minimizing investment risk.


The options continue. In October of 2005, American Express financial services launched its Amex One Account, the first investment product that offers profits of an investment fund without losing the flexibility of a check account.

Amex One is a product of American Express Bank in Mexico that gives the investor the possibility of predeter-mining the balance to maintain in a checking account and invest remaining resources in the fund AMEX-MD.

This new account administrates the resources automatically to maximize the profits. Furthermore, it offers the client access to the resources of his investment, even if they are not available in his checking account. With Amex One Account, the client obtains the liquidity and convenience that checking accounts give through various ways of access and at the same time it guarantees a high profit in the surplus of liquidity, which has been more than 6 percent in the last 12 months.

Armendariz, of American Express, said: "The investors that until now had to sacrifice their profits in exchange for flexibility and liquidity for their daily necessities, now have a very comfortable alternative in one product. With an added value--the tranquility of knowing that, in an automatic way and without worries, the account optimizes profit and liquidity.

He added that the Amex One Account complements and consolidates the portfolio of the bank products and each one of the 20 plus investment alternatives.

This model, efficient in costs and which offers high added value products, has allowed American Express Bank to position itself as one of the banks with solid growth inside its sector. An example of these products is the moderate investment portfolio that has given gains three times more than inflation, 17 percent annually during the last two years.

With a minimum of 50,000 pesos required for its opening, Amex One Account offers a gain between 5.5 and 6 percent. For example, a client with an investment of 50,000 pesos, of which 10,000 pesos is in his check book, will obtain benefits of more than 3,000 pesos a year.

Another important characteristic of Amex One Account is its scheme of flexible commissions that offers two options, according to the client's preferences. For clients who prefer to pay a monthly installment of 75 pesos, they can make all their procedures and movements. For clients with few procedures, there exists the option of five pesos per operation.

So the opportunity is there for the man on the street to gather his hard-earned pesos and place them with one of the many investment funds now proliferating the high-street banks. To quote Armendariz at American Express: "Just do it!"
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Article Details
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Author:Stewart, Graeme
Publication:Business Mexico
Geographic Code:1MEX
Date:Dec 1, 2005
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