In a year marked by economic crisis and adjustment, the last quarter may present the only opportunity for some individuals to invest any surplus. Following a slight recovery in salaries from the middle of the year, those who have the means to invest will seek conservative alternatives to ensure they maintain their purchasing power.
With this goal in mind, TN reached out to market specialists to discuss the investment alternatives they recommend for the last three months of the year. Given the complex context, they particularly focused on dollar-denominated assets.
Also read: Due to currency exchange delays, the cost of living in dollars has risen 70% since December
“In recent months, the local market has shifted. The banks have begun to greatly expand their credit offerings and require liquidity, which they have been acquiring through the sale of Treasury bonds. Additionally, there has been a bleach of capital. In summary, we find a market that is less liquid in the peso segment and significantly more liquid in the dollar segment,” explained the fund manager from MegaQM.
The US Federal Reserve recently lowered the interest rate for the first time in four years, affecting the performance of some investments. (Photo: Brendan McDermid/Reuters).
In contrast, Tobias Sanchez, an analyst at Cocos Capital, stated that the current context is challenging on both international fronts, due to the lowering of interest rates, the elections in the USA, and conflicts in the Middle East; as well as domestically.
“At the local level, notwithstanding the positive data presented by the Government, there are still variables that need adjustment that could create stress in the economy and consequently, in financial assets. Therefore, we prefer to create a portfolio that ensures stability and acts as coverage due to market volatility,” he noted.
Negotiable Obligations: The Recommendation of the Moment
Corporate bonds, commonly referred to in financial terms as negotiable obligations (ON), are among the most frequently recommended options by analysts. Several top-tier companies have sought to take on dollar debt this year with instruments that offer attractive hard currency rates and predictable cash flows.
“Negotiable obligations continue to be the most advisable option for conservative investors seeking fixed-income investments in dollars. Nonetheless, it is important to note that following the significant demand we observed last month due to bleaching flows, the returns they offer have decreased substantially,” stated Juan Ignacio Bialet, manager of Personal Finance at SBS Group, who particularly recommended bonds with maturities of two to three years.
The Central Bank issued Bopreal bonds in dollars, which are also recommended for conservative investors. (Photo: Daniel Vides/NA).
However, he added that for enhanced returns, investors could also incorporate series 1 of the Bopreal bonds issued by the Central Bank, which matures during this Government’s term and doubles the performance of ONs.
A Balanced Investment Portfolio
Sánchez devised a theoretical investment portfolio for conservative investors, prioritizing stability, and suggested allocating 70% of the available capital to options in US currency.
- And 30% in the fund Coconuts Savings in dollars, which includes a diversified portfolio of Argentine ONs and American Treasury Bills (T-Bills).
- And 25% in Pampa Energy‘s ON, maturing in 2031, which yields approximately 7% in dollars.
- And 15% in the ON of Southern Gas Carrier, maturing in 2031, which also yields around 7% in US currency.
The analyst pointed out that the remaining 30% is allocated to peso investments. This includes 20% in Capitalizable Treasury Bills (Lecap), maturing in March 2025, which have an effective annual rate in pesos exceeding 56%. “We believe they offer a strong rate. A decline in inflation is anticipated in the coming months, which is why we included this instrument,” he explained.
Among investment alternatives in pesos, bonds that adjust for inflation function as a hedge. (Photo: AFP / Luis Robayo).
Finally, he allocated the last 10% to inflation-adjusted bonds, specifically mentioning the TZX26, which matures in June 2026. “They are currently yielding double-digit real rates and serve as cover against potential future increases in nominal value,” Sánchez noted.
Take Refuge in Funds
For more conservative and less experienced investors, delegating the management of their portfolio to professionals through a mutual fund is an appealing option. In this context, MegaQM recommended three vehicles in hard currency for protection.
- The most conservative option is a money market fund in US currency, which has no assets subject to market valuation. They referred to it as “MegaQM dollar liquidity,” and stated that it currently yields close to 1% annually due to recent declines in returns.
- With a somewhat higher performance, around 5% annually, there are funds that invest in corporate and government bonds from Latin America. Among them, they mentioned the fund Megainver fixed income Latam, which includes assets from Brazil and Chile. “The additional advantage it presents is the potential to capture the positive effect that could arise if the rate-cutting process advances in the United States and other central economies,” they explained.
- The third option is a bond fund from local companies, specifically recommending the product MegaQM corporate dollar, which offers an approximate return of 8% per year.
Investment Alternatives in an Economic Crisis: 2024 Insights
In a year characterized by economic crisis and the adjustment, the last quarter may be the only opportunity for some to invest any surplus. Following a slight recovery in salaries beginning mid-year, those who can navigate the investment waters will likely seek conservative alternatives that help prevent the erosion of their purchasing power.
With this objective in mind, experts from TN consulted market analysts on recommended investment alternatives for the last three months of the year. In an intricate economic context, their focus turned particularly towards dollar-denominated assets.
Also read: Due to the exchange rate delay, the cost of living in dollars has risen 70% since December
“In recent months, the local market has taken a turn. The banks have begun to significantly expand credit, necessitating liquidity, which they are acquiring through the sale of Treasury bonds. The market is now less liquid in the peso segment compared to the dollar segment,” explained a fund manager from MegaQM.
Meanwhile, Tobias Sanchez, an analyst from Cocos Capital, noted the challenging conditions both internationally and domestically, with events like the decrease in interest rates, US elections, and Middle Eastern conflicts at play. “At the local level, despite positive governmental data, variables remain to be adjusted that could generate economic stress and impact financial assets. Thus, we prefer to curate a portfolio that offers stability and acts as a hedge against market volatility,” he added.
Negotiable Obligations: The Recommendation of the Moment
Corporate bonds, known as negotiable obligations (ON), have become a frequent recommendation among analysts. Numerous reputable companies have sought debt in dollars this year, offering attractive hard currency rates with predictability.
“Negotiable obligations remain the most suitable option for conservative investors seeking fixed income in dollars. However, it’s crucial to understand that the returns have decreased considerably due to heightened demand in the past month for bleaching flow,” noted Juan Ignacio Bialet, a manager at SBS Group, who particularly recommends bonds maturing in two or three years.
For additional performance, investors may also consider Bopreal series 1 bonds released by the Central Bank, which mature during this government’s term and offer double the performance of ONs.
A Balanced Investment Portfolio
Sánchez proposed a theoretical investment portfolio for conservative investors, prioritizing stability with a recommended allocation of 70% of available capital in US currency.
- 30% in the Coconuts Savings in dollars fund, which offers a diversified portfolio including Argentine ONs and American Treasury Bills (T-Bills).
- 25% in Pampa Energy’s ON maturing in 2031, yielding approximately 7% in dollars.
- 15% in Southern Gas Carrier’s ON to 2031, also yielding around 7% in US currency.
The remaining 30% would be dedicated to investments in pesos, including 20% in Capitalizable Treasury Bills (Lecap) maturing in March 2025, which currently have an effective annual rate in pesos greater than 56%. “We expect an attractive return for these, anticipating a drop in inflation in the coming months,” he remarked.
Finally, the last 10% would be allocated to inflation-adjusted bonds, particularly focusing on TZX26 maturing in June 2026, which currently yields double-digit real rates, serving as a hedge against potential nominal increases in the medium term, noted Sánchez.
Take Refuge in Funds
For more conservative and less experienced investors, the option to delegate portfolio management to professionals through a common investment fund can be highly attractive. In this respect, MegaQM recommended three hard currency vehicles for safe havens:
- The most conservative option is a money market fund in US currency with no assets subject to market valuation. They highlighted “MegaQM dollar liquidity,” currently yielding approximately 1% annually due to recent declines in returns.
- With a slightly higher performance, around 5% annually, are funds that invest in corporate and government bonds from Latin America. They especially mentioned the fund Megainver fixed income Latam, which includes assets from Brazil and Chile, capturing the positive effects that may arise if rate cuts occur in the US and other major economies.
- The third option is a bond fund from local companies. Here, they recommend the MegaQM corporate dollar product, which offers approximately 8% return annually.
