After more than 10 years dabbling in the stock market and investments, in 2014 CADIEM innovated by implementing Wealth Fund Management to its portfolio of services, being the only company that offered it in the capital market at that time. That wise decision today celebrates seven years in a market that never stopped growing, managing to date a patrimony of G. 413,293 million and more than 3,000 participant accounts. This fund also has an AAf py risk rating, being the best rated in the country.
CADIEM Administradora de Fondos Patrimoniales de Inversión started with Mutual Funds, which is one of the most used instruments in the world to make investments. The Mutual Fund allows to invest collectively with the contributions of legal or physical persons to a common fund to invest in financial instruments such as ADCs, bonds and shares, in a diversified way reducing the investor's risk.
The first was the Mutual Fund Available in Guaraníes, years later it expanded its portfolio with the Mutual Fund Growth in Guaraníes and the Mutual Fund Available in U.S. Dollars. Each of the funds is designed with specific policies on the investments they can make. Currently, CADIEM manages about G. 950,000 million of accumulated assets, being the company with the largest portfolio in the market.
In 2020, a delicate year for the economy, CADIEM took another step forward in the market, launching the Industrial Buildings Investment Fund, the first real estate fund in the country. A product that invests directly in the real sector of the economy, which generates labor, investments and the development of the industrial sector in the market, boosting the country's economic growth.
Also in 2020 CADIEM, given the context of isolation and urging the public to stay at home and take care of themselves, took the opportunity to renew its website and launch an app to remain close to its clients, and thus be able to follow up and manage their investments comfortably, wherever they are. During this time it managed to double the funds managed in guaraníes and triple the funds managed in dollars, always meeting its profitability objectives.
With respect to these seven years in the market, we talked to César Paredes, Chairman of CADIEM Administradora de Fondos Patrimoniales de Inversión, about the fund management method and its performance in the capital market.
1. What was the need you detected to implement Mutual Funds within the product range?
It is always the clients who guide us in the decisions of products and services to implement. In the case of the first Mutual Fund that we started 7 years ago, our clients asked us for an instrument that would allow them to have a better return than conventional checking and savings accounts, but with the possibility of using the money at any time without additional costs. That is how this product was born, which in the end turned out to be a success and a model that was followed by our colleagues who later joined the market.
2. How does this tool differ from conventional investments?
Mutual funds have two important advantages, the first is that it is an already diversified investment, so the risk is lower than investing in a single place and, secondly, it has a professional administration, which allows to generate higher returns than traditional instruments. It is good to point out that each mutual fund has its own internal management regulations, which delimit the risks that can be assumed and each manager does his job in his own way, so they are not all the same.
3. When is it convenient for the client to invest in Mutual Funds and what are the benefits?
The main advantage is for the client who does not have the capacity to hire a manager for his investments. This client, when investing in mutual funds, as it forms a large capital contributed by many, has access to the professional management of his money, sharing the costs of such management with the other participants of the fund. However, it can also be used as an individual investment instrument, forming part of a diversified portfolio, further improving the risk-return ratio of that portfolio. Profitability, diversification and liquidity would be the main attributes.
4. How much can I invest in Mutual Funds?
We at CADIEM receive investments from G. 10,000,000 and USD. 5.000.
5. What is the Industrial Buildings Investment Fund about and how does it benefit the national economy?
The first thing we have to do is to distinguish Mutual Funds, which are formed by resources invested in highly liquid instruments, so that the quotas can be easily converted into cash through the same Administrator, from Investment Funds, which are formed by resources that are normally invested in less liquid assets, related to the real economy, so that the quotas, to become liquid, are traded on the Stock Exchange, like a bond or a stock. Having clarified this, I will now describe the Industrial Ships Fund.
This is an Investment Fund whose objective is to raise US$22,000,000 and thereby purchase a piece of land, develop a 42,000 m2 roofed industrial park on it, lease the park for a period of 8 to 10 years and then sell it to return the capital to the investors. Over time, the rents will generate dividends for the investors in the order of 7% to 9% per annum and the final return, which depends on the sale price, will be between 8 and 12% per annum. The sale will always be made with the authorization of the Fund's participating investors, but we have already identified many large volume investors in the region who would be interested in acquiring the rental streams that this business generates, as it is more stable than even residential rentals.
This business started from the need identified by the people of REISA (whose partners are Pedro Zuccolillo, Sebastián Gorostiaga and Sebastián Benitez Bittar), who are our allies in this product, to generate suitable places to rent to industries and logistics companies that need these facilities to move or set up in the country. The park will have an effluent treatment plant, a small electrical substation and all the services so that tenants will have a high-level place at market prices. Currently, existing parks, of this level or similar, are occupied at 95%, so we are sure it will be a success for investors. It is a type of infrastructure that allows the landing of foreign companies in our country, since foreign industrialists prefer to use their resources in machinery, inputs and operating capital, rather than investing in fixed assets. This is the world trend in this sense and we see it in several neighboring countries with great success.
This Investment Fund allows a medium-sized investor, starting at $50,000, to participate in a real estate product that is normally only available to large investors, with the advantage that his investment is listed on the stock exchange, which allows him to have good liquidity in case he needs to recover his capital.
6. What message do you have for those who want to start investing?
The message is simple, GET STARTED. There is no better school of finance than to put some guaranies or dollars and see how your money works for you. It is essential to get good advice, so that the risks and possible returns are well explained to you. Do not believe in the wonderful promises of high profitability and low risk, that normally does not exist, but it is a very used resource to swindle.
There is no such thing as fantastic profits overnight, for that it is better to play a game of chance, the creation of wealth from investments requires mainly discipline, perseverance and good advice and is achieved with several years of management.
Why is fund management not very well known in our country when it is one of the most widely used instruments in the world?
At the end of the 90's we already had Mutual Funds in Paraguay. Unfortunately, due to the Argentinean crisis at the beginning of 2000, the largest mutual fund manager in existence had to close its doors and 1 of the 3 funds it managed generated losses for its investors. This caused the product in general to be demonized and nobody dared to bring it back to life, until we decided to try again in 2012. That decision had its result a year and a half later, in March 2014, with the start of operations of the Available Guaraníes Mutual Fund. Also important was a reform of the law, propitiated by the National Securities Commission in 2017, which corrected some minimal but important issues for the growth of the market. Today, the Wealth Funds industry is a flourishing industry, with 5 administrators operating and I understand that another 2 are in the process of opening.
Another fundamental issue for the development of this industry is that Pension Funds should be regulated and be able to increase their volume under management, as Pension Funds are the largest investors in Mutual Funds and Investment Funds worldwide.
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