MAPFRE launches bond fund to finance Madrid hospitals battling coronavirus

Nurse wearing basic PPE

A new mutual fund has been created to finance the fight against Covid-19 in Madrid’s hospitals. With a Spanish local government bond as its underlying asset, the fund is promising a generous 3 per cent return at the end of three years.

The MAPFRE Compromiso Sanitario fund was launched by insurance giant MAPFRE, and registered with the CNMV, the Spanish National Securities and Exchange Commission.

Jose Luis Jimenez, MAPFRE´s group CIO, said that at its outset, the idea was a simple one: “‘Why don’t we try to finance the Spanish health system?’, we asked ourselves.”

Spain has been hard hit by the virus, seeing over 20,000 deaths from Covid-19, with the Madrid region accounting for around a third of the total deaths in the country.

“We wanted to make a bridge, and so we discussed it with the authorities and discovered that the worst affected area was Madrid,” Jimenez continues.

Madrid’s authorities were then approached with the idea by MAPFRE, and created an investment-grade EUR50 million “social” bond especially for the firm. The bond was placed by financial institution BBVA, and equity is limited to a maximum of EUR50 million, and each participant may contribute up to EUR50,000.

At the time of the launch, Álvaro Anguita, managing director of MAPFRE AM, said: “The fund aims to align our clients’ savings with the financing of a specific healthcare project in the face of the Covid-19 crisis. To do this, we have created an attractive product, which bridges the gap between people’s savings and the currently much-needed health funding.”

MAPFRE decided to add an extra donation of nearly EUR1 million, in order to bolster the fund’s return to 3 per cent, which is well above the bond yield, as a way to reward investors for financing the project.

Perhaps surprisingly, other institutions were quick to co-operate and offer their own concessions. The fund does not entail fees for commission, management, custody, or market placement, and the fund’s depositary, BNP Securities Services, waived the usual charge.

“One of the things we’ve discovered is that there’s lots of solidarity there. We’ve had lots of calls not just from our clients, but also from our competitors, wanting to help,” says Jimenez.

Whether this is the way forward for crisis financing has yet to be seen, but Jimenez also stresses that since the fund involves public debt, the Madrid local government is committed to disclose all spending as a matter of public record.  

This means “everything will be measured” by MAPFRE, to judge how well it has achieved against its aims of improving Spanish healthcare.

MAPFRE AM, which currently manages around EUR40 billion, has also recently contributed EUR5.7 million to the sector fund formed by insurance companies to protect the healthcare personnel fighting Covid-19 in Spain