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“We have adjusted our portfolios to be shorter in duration with a greater commitment to core debt compared to the periphery”

May 10, 2023

Redacción Mapfre

Redacción Mapfre

  • Tell us a little about your professional background, from the time you first arrived at MAPFRE AM, and your day-to-day work at the company.

I joined Mapfre in October 2016, as part of the Insurance Companies Fixed Income management team. Initially, I focused more on managing immunized portfolios and structured products. A year ago, organizational changes were made and I now participate more actively in the coordination and organization of the team.

Our day to day tends to be pretty varied. We monitor the markets, news or events that might affect us. Also, perhaps one of the most enriching aspects, we interact a lot with colleagues from other areas, providing us with broader and more comprehensive knowledge of the insurance world and better understand the needs of our customers.

  • You are dedicated to managing the Group's balance sheet. What strategies are you following against a backdrop of rising interest rates?

After years of expansive monetary policies, where we started to wonder if we were not destined to live in a scenario of very low inflation or even deflation, we have gone to the opposite end of the scale, with inflation levels that I don't think anyone would have contemplated in their scenarios.

In response to this phenomenon, central banks have started a cycle of interest rate hikes to try to stop this rise in prices. Remember that the price and profitability of fixed-income assets move in the opposite direction. Rate hikes mean that the price of bonds fall. And the main measurement of risk in relation to fixed-income assets is duration. The shorter the duration, the lower the fall in price when interest rates increase.

In this context, we have adjusted our portfolios to be shorter in duration. Although given such high inflation, I think the biggest challenge was not so much opting for short durations to reduce exposure to the risk of falling bond prices, but "how short" to go.

  • Most assets managed by the Group are public debt. What does the procedure for selecting them involve? How do you manage the maturity of these securities to reduce their exposure to market volatility?

Each year, we review our benchmarks and model portfolios, separating them by type of asset (public vs. private fixed income) and within these types, by country and sector.

In the case of public debt, the withdrawal of stimuli by central banks has resulted in us adjusting the model portfolio, reducing the weight of the periphery in favor of core and semi-core debt. The aim of this has been to reduce the exposure to the debt of countries that have benefited most from the expansionary policies of the ECB and that now, with the change of scenario (QT), are the most exposed to greater adjustments (higher levels of debt/GDP). 

We have also been more active in terms of supranational assets and covered bonds as alternatives to diversify with quality assets.

  • Does this include ESG characteristics? If so, how do you integrate them?

Yes, when selecting assets we include environmental, social and governance (ESG) factors into the decision-making process. We have a procedure manual for integrating ESG in which the lines of action are clearly defined.

This selection is complemented by the periodic controls of portfolio risks performed by Mapfre AM in which, among other factors, ESG risks are monitored.

Furthermore, all Mapfre AM managers have obtained the CESGA (Certified Environmental Social and Governance Analyst), awarded by EFFAS (European Federation of Financial Analyst Associations).

  • Fixed income has once again come to the forefront after years of barely any returns. What recommendations do you have for savers to start investing in this type of asset?

As is the case with any investment, I would bear in mind the premise of only investing the savings you are not going to need. In a situation like the one we are seeing at the moment with extremely high volatility, this is an aspect that must be taken into consideration more than ever. And correctly choosing the asset term to adjust it to the time horizon of your investment.

Finally, and although this tends to be repeated a lot, I never think it hurts to offer a reminder, insist that fixed income offers a return upon maturity, but that does not mean you will definitely not incur losses if the investment is redeemed beforehand.

  • As part of fixed income, which segment offers the biggest potential?

Given the cycle of rate hikes we are seeing and the cost of financing that this implies, in credit I believe that the sectors/companies with healthy balance sheets, low levels of debt and lower Capex needs will do better.

As well as sectors that are less exposed to volatility in the price of raw materials.

When it comes to public debt/supras, I think that countries with more healthy public accounts and where the ECB has been less active within the framework of its purchase programs will do better.

  • What is your forecast for fixed income this year? And by segment?

In terms of interest rates, we believe that the background scenario is a cycle of interest rate hikes, although we believe that in the short/medium term they may have peaked. We expect high levels of volatility to persist in the interest rate market, depending on the price and activity/GDP data published.

When it comes to lending, we have assumed a rather defensive position and in general we expect widening spreads due to the "dual action" of central banks: rate hikes (more expensive financing conditions) and withdrawal of stimulus packages (as a result of which a significant buyer of these assets is disappearing).


Hobbies: Walking with my dogs, going for walks in the countryside, traveling

Favorite food: It’s difficult to select just one... ham and Spanish omelet (that’s a little runny in the middle 😊)

Favorite city/country: Tokyo because of the contrast between modernity and tradition. Egypt, because of its grandeur and Italy because of its charm.

Favorite musical group: That depends on my mood. I can switch from listening to Imagine Dragons to Frank Sinatra, with a little classical music in between.



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