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CDT or collective investment fund? Which to choose and why
They are the two most common entry points to fixed income in Colombia, but they work very differently. With a CDT (certificate of deposit) you lend money to a bank for a fixed term at a fixed rate. With a collective investment fund (FIC) you buy units of a portfolio run by a management company, and your money rises or falls with the value of that portfolio every day.
The differences, one by one
| CDT | Collective investment fund | |
|---|---|---|
| Return | Fixed and known from the start | Variable: it depends on the portfolio; it is not guaranteed and can be negative on some days or months |
| Term and liquidity | Agreed term; it cannot be cancelled early (sometimes it can be sold in the market) | Open-ended funds let you withdraw in one or a few days; others have a minimum holding period |
| Costs | Already built into the rate | Management fee, deducted daily from the return |
| Deposit insurance | Yes: Fogafín, up to COP 50,000,000 per person and per institution | No, although the fund’s assets are kept separate from the manager’s |
| Withholding tax | 4% of the interest | Generally 7% of the returns |
| Minimum amount | Set by each bank | Usually low; some funds let you start small |
Why a “fixed income” fund can lose money
A fund invests in bonds, CDTs and TES that are marked to market every day. When market rates rise, the price of those securities falls and the fund’s unit value drops, even if nobody has defaulted. It happened in Colombia in 2022, when rates rose sharply: many conservative funds showed negative returns for several weeks. We explain it in why bond prices fall when rates rise.
When each one makes sense
- CDT: you know when you will need the money, you want a certain amount at the end and the Fogafín insurance matters to you.
- Open-ended fund: you need to be able to withdraw at any time (an emergency fund, for example) and you accept that the return varies.
- Both: many investors use a fund for short-term money and a CDT “ladder” with staggered maturities for the rest.
What to check in a fund’s fact sheet
Every FIC publishes a monthly fact sheet. Check at least: the management fee, the portfolio’s duration (the longer it is, the more it moves with rates), its historical volatility, the ratings of the issuers it invests in and its net return over several periods, not just the last month.
Modules 2 and 3 of the course: the Colombian menu and collective investment funds
CDTs, TES, bonds and funds in the same table, how to read a fund’s fact sheet and what the fee really costs you. Launch price with the coupon LANZAMIENTO20, already applied in the button, until November 8.