It has not been a good year for Spain and the country’s fund managers and 2012 looks equally challenging with developments depending on factors outside the authorities’ control and on the new government’s ability to implement reforms and restore investor confidence.
These issues were only partially addressed at the December European Union summit to deal with the crisis. Many market participants were disappointed, but Martínez-Aldama says that what was agreed will help in the longer term. “I think that after the European summit we should see more confidence in the future. Some measures have been or will be approved and were agreed by the vast majority of the countries,” he says.
While the summit failed to provide a definitive solution to the crisis, it has clarified things, he says. “There will be more stringent and restrictive budgets in the future; there will be more control, and in the end it is the first step towards stability bonds,” he says.
The fiscal compact will have a positive influence and help to stabilise markets. It will take time but it will make things clearer for investors, he says. “It is a clear signal to the markets that those years when there was no controls of budgets have come to an end.”
Spain’s fund management industry also faces other challenges. Treasury bills have become very competitive, offering above 5% for 12 months in auctions in November during a period of intense market nervousness. The local market has calmed slightly since with the rate at similar auctions in mid December dropping to a little above 4%. But this is still high. The treasury should not need to offer this type of return to sell its bills, he says.
“The treasury bills are in big competition with private debt and that’s not good,” Martínez-Aldama says. Moreover, these bond issues are not limited to the central government: regional and local authorities also offer high rates to raise capital.
Clara Bergareche, general director Spain and Portugal at Schroders, agrees. “2012 will be another challenging year for the asset management industry in Spain, which will be heavily influenced by banking sector capital needs and deposit offerings, as well as the arrival of a new competitor: public debt issues.”
Fund managers hope that the pressure on the treasury will ease as a result of measures taken or promised by the new government. “We will have to see how the government implements their priorities,” says Martínez-Aldama.