According to this communiqué issued by the CNMV last Friday, investment funds registered in Spain for marketing will have to publish a series of warnings in addition to those set out in the current regulation. Special emphasis is placed on fixed-income funds and funds that establish a return objective, whether guaranteed or not, and structured funds. These warnings must be included in the prospectus of the funds, as well as in the DFI (Key Investor Information) and in the IPP (Periodic Public Information). In other words, no one, neither investors nor judges, can say that the CNMV is in any way responsible for the losses that any investor may incur in fixed income in the near future. The fact is that they have already seen the lion's ears when the CNMV has had to defend itself in recent years for having acted with slovenliness, incompetence and/or negligence in the pitiful issue of preferential securities.
This time they are rushing to cover their backs against the coming debt storm, forcing us to specify the risks involved in lending our money to issuers rated below BBB, total income and costs of the portfolios of these funds (especially those where a target return is announced), average gross IRRs, average life in years, percentage probability of scenarios in structured funds, and a very long and bureaucratic etc. And all for what? To prevent investors from buying insolvent and dangerous debt? No. The point is to keep investors buying it. (who else would do it if the banks have been getting rid of it for months???), but that when the fixed income tsunami sweeps away historic volatilities and yields, the regulator's actions will not be called into question. Nothing more. Any more detailed information and risk warnings are, of course, welcome, especially on structured products and products with target yields, which have been a veritable black pudding, both in terms of fees and the abuse of target or guaranteed yields with a minimum of 0% (sic). But make no mistake, the motivation for these additional measures is not the preservation of investors' interests at all, but to avoid regulatory liabilities in a market that is going to suffer movements and losses never seen before in the already misnamed fixed income.
In short, this is further evidence of the risk for ordinary investors of lending their money in the traditional fixed-income market in the coming quarters or years (you can re-read «2015 could be the annus horribilis for the traditional investor«). Greece and its brand new president Tsipras will only be the first to proclaim that the king is naked, i.e. that the debt is unpayable. But other unpayable debts in southern Europe may follow... The house of cards is coming to an end, and regulators are legally preparing for its collapse. Investors would be well advised to focus their attention on strategies away from volatility and insolvency which will reign supreme on the traditional fixed income (and equity) circuit in the near future. This is the (umpteenth) warning.