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ARGENTINA | 14-11-2019 18:25

Mobile banking app offers Argentines way to invest in low-risk mutual funds

As Argentines seek to maintain the value of their savings amid capital controls and 50 percent annual inflation, the Ualá app believes it may have the answer...

Argentina’s Ualá, the mobile payments app backed by heavyweight investors George Soros and Steve Cohen, is offering its users the possibility of investing in a low-risk mutual fund through the app.

The option to invest cash stored in the electronic wallet into a money-market mutual fund in pesos comes as part of a partnership with local broker SBS Asset Management SA, said Ualá founder and Chief Executive Officer Pierpaolo Barbieri. Users will have the option of investing as little as one peso – two cents on the dollar – into a fund that invests in time deposits and remunerated accounts.

The move comes as Argentines seek to maintain the value of their savings amid capital controls and 50 percent annual inflation. The government tightened capital controls after opposition leader Alberto Fernández won the presidential election in October 27, restricting dollar purchases by savers to just US$200 per month compared with US$10,000 per month previously. Argentines tend to flock to greenbacks amid volatility, a response to several financial crises and a currency that has only weakened over time.

“When there’s capital controls, you need to give people a way to preserve the value of their pesos,” said Barbieri in a phone interview from Buenos Aires. “Our aim with this fund is to give savers a good cash management tool, to allow them a daily income from the day of their payslip until they need to spend it on products and services.”

The fund invests in conservative instruments including time deposits and avoids risky bonds.

Ualá has issued 1.3 million prepaid cards since it started operating in October 2017, as part of a bet on long-term growth in a country in which less than half of the population has a bank account. In addition to early-backers Soros and Cohen, Goldman Sachs Group Inc. and Chinese internet giant Tencent Holdings Ltd have also announced investments in the company. Ualá started offering its users loans in the middle of the year.

The fund, SBS Ahorro Pesos FCI, allows for same-day redemptions and is managed by SBS Head Portfolio Manager Cristian Brau. The fund’s management fee is 2 percent in pesos with no spread over performance.

“We’re constantly making an effort to boost people’s access to the capital markets,” said Leandro Trigo, chief executive officer of Grupo SBS. The broker is also providing Ualá access to a platform that allows for “robust, safe” investing, he added.

The company opened more than 52,000 accounts exceeding 32 million pesos in a beta stage launched to some clients in early October. Ualá, which has 175 employees, expects to expand to 200 by year-end.

“This is a product with zero chances of default,” Barbieri said. “We want to convince people that every day their pesos sleep in a savings account, they lose money. The fund will allow them real positive rates at a time where they can’t freely buy dollars.”

– Bloomberg

by Jorgelina Do Rosario & Carolina Millan, Bloomberg

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