Discretionary portfolio management boom drives Spanish funds' AUM growth

Eugenia Jiménez
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Discretionary portfolio management boom drives Spanish funds' AUM growth

Spanish investment and pension fund association Inverco estimates domestic funds' total volume will increase by 6.6% to €295bn in assets under management in 2020.

The expected growth could be partly due to the "boom" experienced by the discretionary portfolio management services in the country, representing around 21% of the total volume of assets under management. 

Discretionary portfolio management is a form of professional investment management, that invests on behalf of a firm's clients through a variety of securities. The term "discretionary" refers to the fact that investment decisions are made at the investment manager's judgement.

In November 2019, there were 600,000 signed contracts for discretionary portfolio management in Spain, collectively in charge of €72bn in clients' assets.

On the downside, Inverco's forecasts with regards to Spanish Sicavs, for which the association predicts a 0.5% volume's drop to €29.3bn in assets under management during  the present year.  

The industry association attributes the potential fall to the investment vehicle's tax legislation in Spain, "less favourable" than that of its European peers.

In this line, Inverco's president Ángel Martínez Aldama continues urging the Spanish government to equal Sicavs' requirements to those of Europe in order to avoid a potential capital flight.

Under current Spanish tax legislation, investors using Sicavs or investment funds pay 1% tax on capital gains as long as they hold their investment, and provided that certain requirements are met. However, when they sell their holding - whether in a SICAV or fund - they pay the same progressive tax rate of 19% (€0-€6,001), 21% (€6,000-€50,000) or 23% (over €50,000).

The minimum capital threshold for Sicavs in Spain is €2.4m, and in order to qualify for the tax regime already mentioned, a Sicav needs to have at least 100 shareholders. However, there is no maximum percentage a single shareholder can own, which means this supposedly collective investment vehicle can be therefore controlled by a single family or wealthy individual by naming a series of surrogate investors, known as "mariachis".

The requirement of having at least 100 shareholders to be considered collective investment institutions is exclusive to Spain and Portugal across Europe. In France for instance, it is required that they have a minimum of two.

Eugenia Jiménez
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Eugenia Jiménez

Eugenia Jiménez speaks Spanish and is Iberia Correspondent for Investment Europe covering Spain & Portugal, as well as Italy.