Cerulli Expects $1T in Growth for Latin America Funds

Latin America’s mutual funds and private-pension funds will amass another $1.4 trillion over the next five years, according to a Cerulli Associates report.

According to Institutional Asset Management in Latin America, nearly 25% of the growth will be allocated in cross-border instruments. Mutual fund flows in Latin America have averaged $60 billion to $70 billion per annum since the financial crisis in 2008, which is 75% higher than historical averages. The vast majority is still targeted to fixed-income funds, but equity and hedge funds have been gaining ground steadily. Cerulli sees this growth in the mutual fund segment coming primarily from institutions and affluent investors, and less so from traditional channels such as retail bank branches.  

The report says Latin America’s private pension managers, which oversee individual countries’ social-security savings pools, have benefited from liberalized regulations allowing them to invest increasing amounts in equities and in international vehicles in general.     

“With US$136.7 billion under management and a firm government mandate for plowing their holdings into equities, Chile’s Administradoras de Fondos de Pensión (AFPs), or private pension fund managers, are the premier go-to institutions for global fund managers and ETF sponsors seeking allocations in Latin America. As a result, we see Chile as one of the most attractive markets for global asset management firms,” said Thomas V. Ciampi, author of the report and principal of Latin Asset Management, Cerulli’s partner in its Latin asset management research. 

Cerulli also identifies the affluent marketplace in Brazil as a strong opportunity for global firms. 

At the mass-affluent level and above, regulators have not impeded the distribution of non-registered products, provided that they are offered privately and not publicly through the mass media.    

This has allowed many large global players to distribute in Brazil with limited on-the-ground presence. Meanwhile, local pure-play managers with locally registered funds have also had success launching products with value-added campaigns (hedge funds, small-cap equity, global funds) that appeal to these same affluent investors.    

"To help with distribution, Brazil sports a good number of high-quality advisory firms and multi-family offices, which have proven to be receptive distribution channels for local pure-play niche managers as well as for global asset managers with or without Brazilian domiciled products. Large Brazilian banks have also tapped these managers - and their local and/or offshore products for inclusion on their private-banking platforms," said Ciampi.

The Cerulli report, produced in partnership with Latin Asset Management, provides firms (those that are currently operating in this region, or contemplating market entry) with insight into product specific trends at both the regional and country level. Markets covered include, Brazil, Chile, Peru, Colombia, and Mexico. The report includes strategic advice and recommendations for firms to act on immediately, or over the longer term.  

More about Cerulli is at http://www.cerulli.com.