X-Square Capital announced the launch of its latest investment instrument, X-Square Balanced Fund, the first mutual fund in Puerto Rico registered with the Securities and Exchange Commission.
The main objective of the X-Square Balanced Fund is to provide investors from Puerto Rico a long-term balanced investment alternative that seeks conservation of capital, current income and growth of capital, company officials said.
“For the first time, investors in Puerto Rico will have access to a balanced fund, duly registered in the SEC,” said Ignacio Canto, president of X-Square Capital.
“This represents a great step for Puerto Rico, which has been limited in recent years due to lack of local instruments. This fund breaks drastically with the schemes of the past,” he said.
The X-Square Balanced Fund invests 60% in shares and 40% in bonds, with an initial minimum investment of $5,000 for Class A and Class C shares, and a minimum investment of $100,000 for Institutional Class shares, the company explained.
The fund is distributed by brokerage houses in Puerto Rico under the SQBFX symbol.
The X-Square Balanced Fund offers three main advantages for the investor: tax benefits, investment simplicity, and liquidity.
Because the fund is a local instrument, Puerto Rico’s tax benefits apply, including exemption from inheritance, property and municipal license taxes, while being exempt from federal taxes, executives explained.
Contrary to other instruments, the fund is simple for the investor, since it does not require the creation of legal structures to enhance tax objectives. Another factor of value to the investor is its liquidity, which allows access to the investment any business day of the week when the New York Stock Exchange is open.
“Since we started operations six years ago, our company has focused on providing viable alternatives that could expand the range of funds and meet the financial objectives set for our clients,” said Canto, who also leads the management of the newly created fund along with a team of financial advisors.
Meanwhile, company CFO Rubén Tapia-Vargas said the fund is a “great tool to enhance the savings’ tax benefits through retirement plans.”
“For participants of retirement plans qualified by the Puerto Rico Treasury Department, whose trusts are organized in Puerto Rico or have fiduciary in Puerto Rico acting as a paying agent, the distributions made through a lump-sum payment are considered long-term capital gains taxable at a special rate of 10%, if at least, an average of 10% of its capital is invested in an asset of Puerto Rico, such as the X-Square Balanced Fund, during three years prior to liquidation. The regular rate is 20%, so a 50% reduction in the applicable tax rate is a great benefit,” said Tapia.
X-Square Capital, a Puerto Rican firm that combines young and experienced talent, attracted international attention in 2013 when it launched the X2 Alternative Dividend Alpha Fund, which at the end of the second quarter of 2019, ranks fourth in the index of the Barclay Managed Funds Report, among 89 hedge funds worldwide.
The firm manages two other funds located in Delaware and Grand Cayman for institutional investors outside of Puerto Rico with total assets under management that exceed $450 million.