Most of you will already be aware of the scandal surrounding Francisco García Paramés’ departure from the investment management firm Bestinver. Let’s just say that the Entrecanales family, owners of the fund management firm, and through their brand-new director Luis Rivera, have provided the perfect example of how to ruin Spain’s best fund management firm and a manager who is a European benchmark in the world of value investing in one fell swoop. Furthermore, it is not only personal relationships that have led Paramés to set up his own future fund management company, but also his two right-hand men: Álvaro Guzmán and Fernando Bernad, who they have just announced who will remain at Bestinver only until the end of the year to ensure a smooth transition. After all, it would be a real shame not to know how to look after, cherish and retain the «European Warren Buffett» in your company, working alongside him and his team for as long as necessary.
The most paradoxical thing about this saga is that Bestinver may well cease to be a money-making machine for its investors, only to become one for its owners. In other words, the Entrecanales may well earn more money in the medium to long term by prostituting their management firm than they do today (which was already a great deal). The fact is that Bestinver could face a situation similar to that of Carmignac, namely a gradual decline in the quality and returns of its management (in this case due to the de facto retirement of Monsieur Edouard Carmignac), in favour of a substantial increase in sales volume via lucrative commission payments to distributors (banks), and by capitalising on very strong historical returns. In Bestinver’s case, those brilliant historical returns will mask the mediocrity of future capital gains for a few years, gradually diluting their brilliance whilst the banks flood «Bestinver» portfolios left, —above all—left, naturally in exchange for hefty commissions that, until now, Paramés had refused to pay.
Since the damage has already been done and the decision is irreversible, any sensible investor should cross their fingers and pray to the «Virgin of Alpha» that Paramés and his team will register their new funds for sale in Spain in the future, but it remains to be seen whether and when that will happen. Therefore, what should concern Bestinver’s investors – or rather, former investors – is not whether the Entrecanales will make more or less money under the new ‘star’ director Rivera, who will have the dishonour of having driven Spain’s best fund manager away from the company he chairs (congratulations, mate). The concern should be finding a fund alternative that is just as good, or better, for their investments in the Spanish or international stock markets. And in the world of funds marketed in Spain, that is by no means an easy task, especially for those focused on international markets. By this we do not mean that it is dangerous to remain invested in this fund manager’s funds for a few months, or that it is a matter of urgency to withdraw your money from them. Simply that you must start looking now for alternatives that are as good as possible, because Bestinver will no longer perform as well or as profitably in the future without its alma mater three-headed.
Let’s see why it won’t be easy to match Bestinver’s quality: As we’ve mentioned on previous occasions, the funds marketed in Spain account for less than 10% of those available worldwide – I recommend you read («Investing from Spain or Luxembourg»), and that severely limits the options for finding alternatives to the quality offered by Paramés and his team. Therefore, the answer to the question posed at the start of this article is that yes, there is life beyond Bestinver’s ill-fated funds, but the need to be able to access ALL investment funds worldwide—through the relevant Luxembourg-based vehicles we explained in the aforementioned article, and not just the 10% fund marketed in Spain—is becoming even more pressing.
However, for those who do not have the minimum capital (€250,000) required to access a vehicle that allows them to invest freely in funds registered anywhere in the world, we can cite honourable exceptions that stand out in the sea of mediocrity that is the Spanish equity funds marketed here (if there were no good Spanish equity funds marketed in Spain, we might as well pack it in). For example, in Spanish or Iberian equities, funds such as those from EDM have a strong track record stretching back more than a decade. Some others even outperform them, such as Fidelity Funds Iberia and Aviva Espabolsa. But beware, as they have also recently seen the departure of their star fund managers: Firmino Morgado from Fidelity; and Iván Martín and José Mª Díaz Vallejo from Aviva. Pay particular attention to the latter two, as the Iberian and European funds of their new management firm are currently awaiting approval by the CNMV Magallanes Value Investors, They are sure to be the talk of the town thanks to the quality of the fundamental analysis these two fund managers carry out on the companies in which they invest. We will be following them very closely, in the hope that they will prove to be worthy successors to the «European Warren Buffett».
When it comes to funds registered in Spain with a more global focus, such as Bestinver Internacional, things get a bit more complicated, and the bar for quality (and therefore for long-term returns) has to be lowered considerably. However, there are some replicas (though not always identical, mind you) listed in Spain that track excellent international funds; however, as they are trackers, they incur an additional fee charged by the European fund manager or platform that markets them, which slightly reduces their original return. This is the case with Amundi International Sicav (a tracker of the US-domiciled fund First Eagle Global) for example, or the GAM Global Selector (a replica of the fund Dalton Pacific & General).
Unfortunately, the options available within the limited range of funds registered in Spain that offer the quality we have come to expect from Bestinver are very limited, and these funds have also undergone recent changes in management. And beyond Spanish equities, there are even fewer viable options. Bestinver, particularly its B. Internacional fund, leaves a huge void for investors who do not have a minimum of €250,000, who are forced to invest only in the funds marketed by Spanish banks. RIP Bestinver.