The idea of researching and publishing a study of the mutual fund industry in Latin America must have seemed like a good idea before the Argentine economy imploded. Tal king about the opportunities in Latin American mutual does not look so clever now. But then mutual managers, distributors and administrators ought to be working to the same lengthy lead times as Cerulli Associates, the mutual fund analysts who published Trends in the Latin American Fund Management Marketplace, earlier today.
According to the report, 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. The report-a joint venture between Cerulli 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.
The full report is scheduled for release this month.