Political Renewal, Regional Amnesties Generate Opportunities for Cross-Border Managers in Latin American Retail Market

Political Renewal, Regional Amnesties Generate Opportunities for Cross-Border Managers in Latin American Retail Market 


July 31, 2018, BOSTON. For Latin American mutual and pension funds, 2017 was one of the best on record for asset gathering, as investors shrugged off political uncertainty and focused instead on improving economies around the region.

The asset increase for the six major asset management markets of Latin America totaled USD 314 billion, the largest advance on record. This finding and more are from Latin American Distribution Dynamics 2018: New Opportunities for Cross-Border Products, a report developed in partnership between Cerulli and the independent research firm Latin Asset Management.

Onshore mutual fund markets of Argentina, Brazil, Chile, Colombia, Mexico, and Peru added USD 190 billion in assets in 2017, ending the year with USD 1.24 trillion. Meanwhile, private pension markets of Andean countries and Mexico tacked on USD 84 billion in assets under management, finishing with USD 504 billion, as corporate pension funds in Brazil added another USD 40 billion.

For the first time in several years, global mutual fund firms also enjoyed a sharp increase in business in Latin America in 2017 and early 2018, as shrinking interest rates locally provoked investors at the local level to purchase locally domiciled feeder funds investing internationally.

Tax-compliant investors' search for diversification is occurring increasingly in local markets, thanks to amnesty and capital-repatriation programs instituted across the region. "Forward-thinking international firms have moved to take advantage of this tendency, especially in Mexico, Chile, and Brazil, where they have concentrated their distribution activities," said Thomas V. Ciampi, founder and CEO of Latin Asset Management.

Ciampi noted that tax transparency and increased formality in Latin America has lowered the tension surrounding offshore-asset-gathering activities. Governments have eased their restrictions on the private offering of UCITS via private banks and multi-family offices operating in Latin capitals, while also making it easier for local providers to create locally-regulated products that can compete with—or allocate to—UCITS.

Looking to 2018, political uncertainty in Mexico and Brazil are the biggest causes for concern in the minds of global firms operating in Latin America. In Mexico, the election of Andrés Manuel López Obrador (AMLO) on July 2 raised worry about the future of the USD 161 billion Afore pension fund industry, which is allocating more than USD 25 billion to global firms. AMLO has mentioned using Afore assets to stimulate the local economy, forcing a diversion of resources from international markets. Meanwhile, in Brazil, upcoming presidential elections in the fourth quarter will either take the country on a rightist or leftist trajectory, depending on which of the extreme (and unpopular) candidates emerges victorious.  

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