Asset managers favouring LatAm over Asia three to one says report

Latin America is the favoured destination for asset managers wishing to increase their fund’s cross-border distribution , according to data from Strategic Insight.

The research firm’s latest report revealed managers are increasingly favouring the LatAm region over Asia with countries like Chile, Peru and Colombia displaying many similar characteristics as Hong Kong, Singapore and Taiwan in Asia – cross-border Ucits hubs with strong growth potential for international firms.

‘Fund managers see Latin America as the primary region of focus for cross-border distribution by a margin of three to one compared to Asia, with our data showing more Luxembourg-domiciled funds registered in Chile than in Hong Kong,’ said Daniel Enskat, the firm’s head of global consulting.

‘Many international fund managers are selling cross-border funds into the region, have acquired local firms or stakes, and are building out distribution and investment capabilities on the ground, either with exclusive third-marketers or with broader teams that service multiple providers.’

Some of these managers include well-known names such as Julius Baer who has acquired a stake in wealth manager GPS, Credit Suisse with strong performance fees from Hedging-Griffo or JP Morgan Highbridge acquiring Gávea.

The report states that by 2020, the region’s current mutual fund assets of $1.4 trillion could more than double to between $2.8 trillion and $3.6 trillion. The biggest increase, however, is expected in its pension assets, currently of $780 billion, which could more than triple to $3 trillion.

Regulation in the LatAm region is another factor which is gaining growing attention, with the firm’s report stating that Europe and the US regulators could learn a lesson or two from their Latin counterparts.

‘Emerging markets are finding their stride and, while willing to listen to "developed markets", see the world through their prism, culture and history. Chile recently removed Dublin-based funds from its pension funds, while Asia is discussing a regional or limited passport to compete with Ucits.‘

‘Brazil has a transparent and sophisticated hedge fund industry with multimercado that could offer guidance to the UCITS/Newcits debate in Europe.’

All of these trends, added Enskat, offer an opportunity to listen and build different business models for success going forward, especially as emerging markets are now starting to build bridges away from developed markets.