Multimarket funds are fleeing investors. Check if it’s still worth it

Multimarket funds have been a small investment star in recent years.

With a strategy that allows allocating resources to a little of everything, from government bonds to shares and foreign currencies, multimarkets started to be indicated for practically all types of portfolios and profiles.

With the Selic rate on a downward trend and the need to move the money to equities, they were the preferred recommendation of managers and analysts as an intermediary option between fixed income and the stock market.

Then, with the violent dips caused by the initial shock of the coronavirus pandemic to the markets, they gained an additional protective role, as they can draw on resources that gain from both rising and falling markets.

But something changed: in September, when the fund industry as a whole received BRL 29.3 billion in new investments, the multimarkets, specifically, had a net redemption of BRL 11.5 billion, according to the most recent data of the Brazilian Association of Financial and Capital Market Entities (Anbima).

According to political scientist Lorena Laudares, from the Órama brokerage’s strategy team, the movement is strongly influenced by the Selic, which is now on a strong upward trajectory and should soon return above 10%.

“Brazilians traditionally like fixed income and, now, they already see a fixed-rate bond maturing in one year, paying 12%”, he says. “It’s a lot of return for fixed income, so the multimarket funds end up losing their attractiveness.”

Órama has been reducing the recommendation for multimarkets in its clients’ portfolios for some months.

In moderate profile portfolios, for example, in which shares do not yet enter, the share reserved for multimarkets dropped from 20% to 15%. The 5% of the difference went to fixed income.

Greater unpredictability

According to Laudares, caution has a lot to do with the great volatility and unpredictability that has taken over the Brazilian market in recent months, which makes it particularly difficult for the managers of these funds to get the strategy right.

“There is a great uncertainty in the scenario, and the market became dysfunctional, it stopped responding to the rules”, he says.

“Multimarkets work best when there is a specific targeting; whether, for example, interest rates are on an upward or downward trend. But we have this interest at 12% and the exchange rate at R$ 5.60 or R$ 5.70, which was not supposed to happen. By theory, the dollar should retreat when there is an increase in interest.”

Interest, stocks, currencies and bonds, at home and abroad, are some of the things that multimarket funds can invest in. And it doesn’t always matter if they’re up or down, as they have mechanisms to win both ways.

The problem lies in not being able to predict at all what the trend might be for them.

Still a good diversification option

For many specialists, however, multimarket funds continue to fulfill the important function of offering diversification and protection, and, therefore, should remain in the portfolios.

In asset management company BNP Paribas Asset Management, client portfolios were, in fact, rebalanced to have less risk – but, in the process, the multimarkets ended up gaining more importance.

“To reflect the market’s deterioration, we reduced exposure to variable income in the last four months, but we preserved the share of multimarket funds”, says Tiago Cesar, manager of the house.

“For the more daring customer, it’s a way to take a little out of the bag, but without completely leaving the game. On the other hand, multimarkets are the furthest point where conservatives, who do not want a stock market, will go. It’s a way to still have a little bit of risk.”

Lucas Taxweiller, investment specialist at the digital investment manager Magnetis, recalls that multimarket funds are, in themselves, an enormous universe of variety.

They can have very different focuses and strategies from each other. They are not like stock funds, which inevitably move more or less along the Ibovespa, or fixed-income funds, which follow the same direction as the Selic and the CDI.

“It will depend a lot on which multimarket we are talking about; it is a very broad product and there will always be some fund going well”, he says.

“This year, for example, with the stock market falling around 12%, the multimarkets that invest more in the stock market will be melting, but with the dollar up 7%, those that invest in foreign exchange will be performing very well.”

In the portfolios of Magnetis, which maintains the bet in this class, the participation of multimercados ranges from 9%, for conservative clients, to 41%, for the most daring.

For the manager, multimarket funds end up playing an important role in protecting the portfolio today.

“The average return of multimarket funds in 2021 is around 2%”, says Taxweiller, citing the IHFA, Anbima’s index that measures the performance of these funds. “If the stock market dropped 12%, and a piece of your portfolio rose 2%, then you’ve already protected your equity.”