Niche opportunities are beginning to open up for fund managers in the US$300 billion Latin American managed funds marketplace-marking a new development in a region where acceptance of mutual funds as investment vehicles historically has been at the mercy of the local banks who dominate retail distribution, according to the latest report in The Cerulli Report™ series, Trends in the Latin American Fund Management Marketplace, scheduled for release this month.
The report-a joint venture between CA and its strategic partner in Latin America, Latin Asset Management-tracks distribution, new-product and regulatory trends in the mutual-fund and pension-fund industries of Brazil, Mexico, Chile and Argentina. CA and Latin Asset Management believe the industry will double in size by 2006, despite Argentina’s devaluation crisis.
The banks’ treatment of funds as savings products rather than investment vehicles, and their tendency to emphasize their own solidity and security, has served to confuse investors as to the principal reasons for purchasing a mutual fund, CA and Latin Asset Management concluded. In addition, the banks’ lock on distribution, the absence of widespread brokerage and financial planning networks and investor bias to extremely short-term fixed-income instruments has given them little reason to offer anything other than proprietary funds on the branch floor.
But gaining strength are important trends that will further open Latin America’s asset management marketplaces, including: the increasing might of pension funds; their eventual need to allocate overseas as local markets shrink; institutional investor demand for dedicated asset managers; high-net-worth-client interest in third-party funds; the implementation of financial planning certification; increased investor education; and investor access to alternative distribution channels.