- Franklin Templeton has had an office in Mexico for 15 years now, as is optimistic about the future
- They were the first firm in Mexico without its own distribution network
- In his opinion, the sector has changed little at first sight, but there are important changes that are not noticed so easily
The invitation for Franklin Templeton Mexico's 15th Anniversary party read: "2005; The first elections in Iraq; YouTube is born; Prince Carlos and Camila de Cornwall get married; Vicente Fox is president of Mexico; The Patriots win the Super Bowl XXXIX; Pope John Paul II dies, Mexico City Metrobus is launched; Evo Morales is elected president in Bolivia; Angela Merkel is elected Germany's first female chancellor; George W. Bush is president of the United States again, "Million Dollar Baby" wins the Oscar for best film and Franklin Templeton opens his office in Mexico." In charge of that office was, and continues to be, Hugo Petricioli, one of the main drivers of the country's fund industry. In an interview with Funds Society, the manager talks about what the market was like then, how it is now and how he thinks it will evolve...
Petricioli, whose team today has over 30 people covering not only Mexico but also Central America from an office overlooking the famous "Independence Angel" on Reforma avenue, in Mexico City, remembers that when he established the firm, he worked from home for a year and had friends who "thought I was unemployed."
At that time, they were the first firm in Mexico without its own distribution network, "that model is the model of a pure asset manager, we had to look for and expect many regulatory changes because the Mexican regulatory system came from the idea that operators were just an appendix of brokerage firms, that has changed a lot." During 2006, several global asset managers tried to establish themselves in the region, but "by 2009 the majority had closed or radically changed their plans for the country, due to the lack of fiscal transparency and the issue with funds of funds, which in retrospect I think it was a very bad thing for the funds supply in Mexico and it greatly limited Mexican investors."
Today, in his opinion, the sector has changed little at first sight, "the fund distributors did not multiply although their model can be very beneficial for investors, independent investment advisors practically do not participate in the sector because they don't have the right platforms to maintain competitive prices and the players remain practically the same and in the same order as when we opened the office."
However, he also considers that "there are important changes that are not noticed so easily: the corporate figure change , the specialization also changed, we see how the big banks are now looking for international managers to advise them on products where they do not have the experience and this is improving the quality of products in Mexico as well as the offer. As an industry we are much more united and we are weighing more and more, not only as a percentage of GDP but also as market participants," he says.
About the future, Petricioli is positive: "I tend to be optimistic, otherwise I would never have started this adventure in an industry where all platforms were closed. The sector in Mexico is going to have to consolidate, the small players don't have viability, the "groups" paradigm has to be broken, specialization is the way to grow and grow better." As they say in Mexico "zapatero a tus zapatos" which means do what you are good at and what you are supposed to do. "I think that small and large players have to analyze in what business they are, are they distributors or managers? If they want to be both they need to make a real analysis of their own economies of scale. Do they really have them? Or not? And if they don't have them they should have to rethink their model and decide. If we do things right, this sector could double in size in 5 years," he comments.
To achieve this, the manager would like to see, among other things, a more competitive vehicle, a much more agile regulation and an improvement in the quality and quantity of information. "The Mexican vehicle is not competitive outside of Mexico because of the regulatory and fiscal framework, my industry colleagues are [competitive] and it is a pity that they cannot export their skills and be even more successful. With more and better standards everything would be clearer for everyone." He mentions.
In his opinion, "the main challenge is that everything is complicated, nothing is agile. It is confusing. If we want to be inclusive and give all Mexicans the opportunity to generate wealth, we have to do something with absolutely all the materials, prospects, key documents, etc. Have you read a prospectus recently? Try to make a comparison in Mexico of funds, we don't even have a standard in the Mexican series."
Meanwhile, Petricioli and his team will continue to work to strengthen a market of which Jenny Johnson, president and CEO, of Franklin Resources said during the anniversary party: "As far back as the 1980s we saw the tremendous potential of Mexico and began making investments here with our emerging markets team...We look forward to strengthening these partnerships and deepening our relationships with you for the next 15 years…and beyond."
In general, the success obtained so far "has been due to two factors: a large company with a great ethical standard and the possibility of building a great team. Without the team, we would not have been able to do anything. Success belongs to each and every one in it, and now we are presented with a great opportunity to offer products to all Mexicans that can generate wealth from their flow," concludes Petricioli.