U.S. Offshore Market Dominates Latin American Cross-Border Fund AUM, but Stalled Growth Looms


U.S. Offshore Market Dominates Latin American Cross-Border Fund AUM, but Stalled Growth Looms

Myriad factors could upset asset accumulation; large U.S. wirehouses are best positioned

August 2019, BOSTON – New research developed in partnership between Cerulli Associates and the independent research firm, Latin Asset Management, concludes that retail distribution in Latin American capitals has become much more enticing for global asset managers, especially as they face myriad challenges in the U.S. Offshore market, among them shrinking fees, rising minimums, reduced number of third-party relationships, and a move to managed accounts at large wirehouses.

The U.S. Offshore wealth segment consists of investments by Latin American investors via wealth managers based in offshore booking centers such as Miami and New York, and is a market from which a number of global managers derive the bulk of their Latin American assets under management (AUM). The findings estimate that cross-border fund AUM derived from the U.S. Offshore segment totals almost USD 100 billion, which accounts for roughly two-thirds of the USD 150 billion total offshore wealth stock.

While it is still a large market, it’s not clear that the overall market is growing, as the U.S. Offshore segment is much more demanding of global managers seeking to thrive there. “Almost all aspects of the business have undergone changes, starting with the approaches of large wirehouses and global private banks, which have adopted fee-based models while streamlining their offerings and taking discretion away from their advisors,” says Thomas V. Ciampi, founder and CEO of Latin Asset Management. “They have undergone consolidation at the advisor level while cutting back on compensation, and their focus on large clients has led to an exodus of smaller clients to boutique firms and multi-family offices—a segment that is growing as advisors bail out of larger firms and set up their own shops.”

“Our view for the U.S. Offshore segment is that firms with strong domestic product lines and entrenched relationships with large wirehouses at the domestic level (i.e., U.S. Onshore) are best equipped to roll with the punches that this segment throws at them, as they will be able to anticipate the next round of restructurings, platform adjustments, compliance, and technology demands,” adds Ciampi.

The findings further suggest that the importance of a relationship or key account manager to handle home-office issues and stay informed about planned changes at the large firms cannot be emphasized enough. Global fund companies that lack this infrastructure and have limited wholesaling resources on the ground in the U.S. are best off focusing on independent advisories and multi-family offices, especially those plugged into third-party broker/dealer networks.

These findings and more are from The Cerulli Report—Latin American Distribution Dynamics 2019: Widening Opportunities in an Increasingly Addressable Market.

About Latin Asset Management
Latin Asset Management is a research and consulting firm focused exclusively on the business of asset management in Latin America, with a core clientele consisting of global mutual-fund and ETF-sponsors doing business in the region. Latin Asset Management is the sister company of Fund Pro Latin America (www.fundpro.com), a subscription website delivering Latin American market news and flow and holdings data to global managers.

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