"MGP has grown despite the complicated market context”

Miguel Ángel Segura, managing director of MAPFRE Inversión SV

First of all, how would you assess the last five years at the Valencia office of MAPFRE Gestión Patrimonial (MGP), which is now celebrating its fifth anniversary?

The overview is very positive indeed. This office has exceeded our expectations year after year. Not just in terms of equity inflows and customers acquired through the different range of products we advise on, but also—and most importantly, in my opinion—the level of customer satisfaction it has managed to deliver. The service provision level is excellent, and we have invested significant time and resources here since the rollout of the MGP project, building an ecosystem of platforms, products and teams that enable us to meet our customer’s needs and objectives efficiently.

What details can you share with us about the office in terms of employees, assets under management, customer numbers and so on? And what about at nation level for all of Spain?

As of the end of October, the Valencia office has a manager and two financial advisors, along with a strong team of 30 financial agents and three cooperation agreements with financial advisory firms. To date, we have a total of 1,976 customers, up 40% year-on-year, who entrust their financial assets to us, a total of €161 million, mainly in mutual funds, pension funds, and savings insurance, with growth of nearly 20%. It’s noteworthy that, despite the challenges we’re facing in 2022 in terms of market volatility, macroeconomic variables, and the unfortunate invasion of Ukraine, the Valencia office has generated new net business worth €89 million.

Nationwide, we already have 19 managers and financial advisors in place, along with a total of 174 financial agents and intermediaries, plus seven cooperation agreements with financial advisory firms. As far as the number of customers goes, we have a total of 11,312, for whom we manage €1.37 billion in assets.

Are you planning to open new MGP offices in Spain? Where?

Yes, we are, most certainly. Being close to the customer is a commitment that has always been a part of MAPFRE’s strategy, and this is shared by MGP. Our company has always understood this well. It’s no small thing that we are Spain's second-largest finance company in terms of branch network, reaching almost every corner of the country. MGP will close out 2022 with a total of seven specialist offices, to which we’ll add another three that we’ll open in the first quarter of next year, in Palma de Mallorca, Malaga, and a third city nearby, such as Alicante.

What’s the theme of the workshop to be held on Thursday, November 24 at Hotel Balneario Las Arenas at 6:30 p.m.?

This event is a small celebration to thank the entire team at the MGP office in Valencia for their effort and a job well done during these five years of operation. We’ll also take the opportunity to share some interesting reflections with the participants on macroeconomic issues of great concern to us in 2022, a challenging year for sure, and on how to face the future with cautious optimism in the field of wealth management and savings investment for both private and institutional customers. And lastly, we’ll also talk about how to incorporate environmental,

social, and good governance (ESG) aspects into investment decisions, something that has become very important in recent times, and which is of ever-greater concern to us at MAPFRE.

From your vantage point, how are financial markets, both equity and fixed income, performing in this year that we’d all rather forget?

We are concerned about the most prudent investors, who are suffering the most in this negative market environment, but at the same time, we’re quite calm. At MAPFRE we were aware that the interest-rate environment we’ve seen in the past decade was irrational, which is why we didn't take many risks in this regard. Our conservative approach to managing the group's investments is a formula we also apply to customers at MGP, which has helped us to weather the storm in the most prudent portfolios. That said, if any good comes out of this normalization of interest rates, it’ll be the strong potential for fixed income, an area where we are truly experts. In equities, we remain quite cautious, since the impact of the interest-rate hikes has yet to reach the real economy (while it has already reached the financial one), and we will wait to see if the earnings of public companies decline before we take on greater risks.

What about the central banks’ monetary policies to keep pace with soaring inflation?

We really make a point of explaining the market context to all our customers to help them make the best investment decisions. In this regard, we’ve been pointing out the two very different inflation dynamics in the U.S. and Europe. In the U.S. what we’re seeing is textbook inflation, with strong demand driven by the fiscal stimulus during the pandemic and supply hindered by supply chain bottlenecks. In Europe however, we’re dealing with supply-side inflation due to the energy supply problems we’re battling with. For the former, the classic prescription is to raise interest rates and set off a recession. As far as the latter goes, we have fewer solutions for European inflation, because even if interest rates are raised, that doesn’t mean we’ll have cheaper and more stable energy supplies. This suggests that the Fed will have an easier time meeting its objective, albeit at a significant cost to the economy. However, the European Central Bank (ECB) faces a more complicated challenge, especially because of the debt problem in many eurozone countries.

Where do you currently see investment opportunities?

Since we believe that the worst of the interest-rate hikes is behind us, at least in the U.S., and that it’s not necessary to take many risks to produce attractive rates of return in fixed income, we’re starting to view high-quality corporate bonds more favorably. In Europe in particular, bonds factor in default rates that far exceed the worst scenario on record, and the pull-to-par effect is quite strong for bonds with maturities under two years. That’s where we're taking our portfolios, along with highly flexible and dynamic fixed-income funds like our fixed-income flagship, the MAPFRE Global Bond fund. As for equities, since the summer we’ve loaded our portfolios with funds with a certain defensive bias and a presence in sectors like health, basic consumption, and infrastructures, and we have reduced our exposure to smaller companies.

What’s your opinion on the cryptocurrency phenomenon?

At MAPFRE, we've always maintained a very cautious, for want of a better word, position in terms of crypto assets. We said it when Bitcoin was trading above $60,000 and we're saying it now when it's trading below $16,000: for us, an investment is an asset that generates value and produces cash flows, as opposed to something that goes up based only on the expectation that it'll go up even more. If we look at the extreme volatility and the lack of legal utility on top of that, given that crypto can't be used to pay debts or taxes, we conclude that cryptocurrencies aren't an investable asset as such.

Is the euro bouncing back above parity with the dollar a credit to the European currency or a discredit to the American one?

When we talk about currencies, we have to be aware that there are many factors behind exchange rates. I wouldn't suggest that there's just one reason why the euro is back above parity. The fact that inflation may have peaked in the U.S., which reduces the pace of interest-rate increases, or that other central banks have bridged the gap in terms of rate hikes compared to the Fed, could also be contributing to the recent appreciation. In any case, we view the US dollar's appreciation as a factor in tightening financial conditions, and the stock market rally in recent weeks could be behind the recent depreciation, although it’s probably something that works both ways.