Last updated: 11:29 / Sunday, 27 July 2014
For global managers

Regulation Initiatives to Improve Cross-Border Opportunities in Latin America

Imagen
Regulation Initiatives to Improve Cross-Border Opportunities in Latin America
  • "Contributions in most markets in the region are mandatory, and are, consequently, growing faster than their respective financial systems, driving the need to expand to foreign markets"
  • Asset managers targeting the wealthy are able to take advantage of a wider range of products and strategies as the segment tends to have fewer regulatory restrictions
  • Cerulli warns that one of the biggest challenges to cross-border fund distribution in the region, however, remains political
  • Although some resources can be leveraged region-wide, global managers should consider strategies targeted at a specific market

According to the latest research from global analytics firm Cerulli Associates, local regulatory efforts are improving cross-border product distribution opportunities in Latin America.

"We believe that the regional pension system and the private wealth segment continue to present global managers and ETF sponsors with the biggest opportunity for cross-border product distribution in Latin America," states Nina Czarnowski, senior analyst at Cerulli. "Contributions in most markets in the region are mandatory, and are, consequently, growing faster than their respective financial systems, driving the need to expand to foreign markets. Asset managers targeting the wealthy are able to take advantage of a wider range of products and strategies as the segment tends to have fewer regulatory restrictions."

In their annual report, Latin American Distribution Dynamics 2014: Entry Points to Emergent Economies, Cerulli analyzes distribution and product development trends in the six key local mutual fund and pension fund markets--Brazil, Mexico, Chile, Colombia, Peru, and Argentina.

"Concerned with recent domestic market devaluation and the inability to fund workers' retirement, industry players, including pension funds and regulators, are increasingly exploring ways to generate appropriate, higher returns," Czarnowski explains. "While it makes sense to hedge pension liabilities with domestic fixed-income instruments, it is wise to diversify the equity portion globally given the concentrated, shallow domestic markets."

Cerulli warns that one of the biggest challenges to cross-border fund distribution in the region, however, remains political. While pension managers and regulators recognize the need to diversify pension portfolios overseas, it is in the governments' best interest to keep investments local--in particular in infrastructure projects--to foster local economy and business.

"Unfortunately, conducting business in Latin American has no 'passporting' benefits. Countries in the region have different regulatory bodies that, in turn, have different sets of rules and regulations. Cross-border mutual funds offered in Peru may not be the same mutual funds accepted in Mexico. Distribution channels commonly used in Chile may not be popular in Brazil," Czarnowski continues. "Although some resources can be leveraged region-wide, global managers should consider strategies targeted at a specific market, given that a single game plan may not be transferrable from one Latin American country to another."

menu
menu