During her last visit to Mexico, Jennifer M. Johnson, President and COO of Franklin Templeton Investments, pointed out that country’s importance for her company, stating that, regardless of the outcome of the elections, "We are very optimistic about the possibilities of the local market."
Its most recent bet, the entry into the ETFs’ market, presents an unparalleled opportunity in Mexico: "Mexico is very interesting since ETFs are bigger than mutual funds, I think it is the only market where that happens", commented Johnson, who, through Franklin Templeton has a line of ETFs that includes passive and Smart Beta strategies. "Mexico is a great opportunity for the Franklin ETFs platform. They are great for all markets, pension funds, institutional funds, retail clients, and we are going to look to position them in all distribution channels," she added. Meanwhile, Hugo Petricioli, the company’s Regional Director for Mexico and Central America, mentioned that he has seen a strong appetite for ETFs from all of his clients.
Regarding the recent change in regulation, which will allow Afores to invest in international mutual funds, Johnson commented: "We believe that open architecture is the best thing for the client” adding that it is a natural progression to first invest in the local market and then turn around to see what’s on offer abroad, “also, when there is greater uncertainty within a country [such as the one generated before the presidential elections and the NAFTA renegotiations], investors like to hedge themselves by venturing into other geographies." She also mentioned that at Franklin Templeton they have “great portfolio managers both locally and abroad, and so we see this opening as an interesting opportunity”.
About the renegotiation of the North American Free Trade Agreement, Johnson commented that it may take a little longer to reach its culmination but that in general, President Trump likes to use social networks to provoke, but he is practical when it comes to executing, “so we believe that in the end it will be something sensible which will not be very disruptive."
Despite the above, and according to Luis Gonzali CFA, Portfolio Manager, the team at Franklin Templeton is cautious in its positioning, seeking to hedge against a global rise in inflation. In addition, and according to Ramsé Gutiérrez CFA,Vice-president of the Fixed Income team in Mexico, the company is also looking, as long as the mandate allows, to reduce the duration of debt portfolios, "since the premium’s time value is currently almost nil."