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Investor Diaries: Colombian and Uruguayan selectors talk pension and wealth challenges

Our relationship managers give us the lowdown on Colombia’s pension market and a conference in Uruguay that attracted wealth managers from across the region.

COLOMBIA

David Gutierrez

Relationship manager, Latin America

In late April I attended the Asofondos conference in Cartagena, an event for Colombia’s pension funds, where the need for reform took center stage.

The country’s four AFPs agreed the state-run pension fund Colpensiones needs to move on from a defined benefit system to a contributions-based one. The government-subsidized program was unsustainable, they said, and it should adopt the same approach favored by the private sector.

However, Santiago Montenegro, president of Asofondos, said any overhaul should be well thought through: ‘We need to respect the acquired benefits and legitimate expectations of those who are close to retirement. Second, we need to unify the “contribution pillar” and the resulting pension system must align with what employees have paid historically.’

Famed economist Nouriel Roubini, AKA ‘Dr. Doom’, was a guest speaker at the event and had his sights set on Donald Trump. Roubini said Trump will not be able to deliver on his promised tax reforms and while markets are pricing in a series of shake-outs that should push the US’ growth rate beyond 3%, the reality is that the president’s plans will be hampered, restricting growth to near 2%.

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Hot topic

The AFPs’ profit margins were a key talking point throughout the event. While the state-run pension fund has become a liability for the government, the private pension system has been very successful managing clients’ assets.

Alain Foucrier, CEO of Colfondos said: ‘The first quarter was great in terms of returns and as an industry we returned about $2 billion. We are managing about $70 billion in assets, out of which nearly 60% comes from returns on investments.’

Regarding last year’s expansion of the AFPs’ international investment cap, he said: ‘Clearly it helped a lot, dollar exposure gave us a real boost last year, as did alternative investments, such as private equity funds with higher returns than traditional investments. This is one of the key drivers behind our profitability. Obviously, market dynamics matter, but the ability to invest in more structured assets really helps.’

Looking regionally, Santiago Garcia, CEO of Old Mutual Colombia, praised investment opportunities in the region, and highlighted Mexico, Brazil and Colombia as alpha generators in fixed income. However, he believes the best opportunities are in Colombian infrastructure: ‘There is a historic opportunity to get into infrastructure investment in Colombia given the 4G government program and the special conditions under which this has been created. Infrastructure projects in the country have funding of $20 billion and there are infrastructure debt funds returning CPI + 7%,’ he said.

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David talks to Alain Foucrier, CEO of Colfondos

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Santiago Garcia, CEO of Old Mutual Colombia, hooks up with David

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David takes some advice from ‘Dr. Doom’

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URUGUAY

Samantha Muratori

Head of Latin American and US Off Shore Relationship Management

In winter, wealthy Argentinians and Brazilians flock to Punta del Este, dubbed the ‘Hamptons’ of the southern cone. Last month, deputy editor Michelle Abrego and I ventured down to this elegant beach town to attend AIVA’s 15th annual Latin-American Encuentro. The event attracted 150 IFAs and wealth managers from Brazil, Argentina, Chile, and Uruguay itself, where attendees could choose from fund manager presentations highlighting current trends as well as more specific workshops to learn about AIVA’s investment platform and the importance of transparent wealth planning.

The evening kicked off with a friendly soccer competition, and you won’t mind me mentioning that Michelle and I helped our team bring home the gold medal in the female tournament. Overall, the event was an excellent networking opportunity for the LatAm asset management industry.

After the conference, I zipped over to Montevideo for a few days of meetings to take advantage of my location in the wealth hub of South America.

I met with many of the region’s gatekeepers, including Gerardo Barbosa, who told me about his transition from Julius Baer to his new career as an independent distributor of Janus Henderson funds in the LatAm region.

Later I met Puente Hermanos’ Juan Jose Varela, who revealed that Paraguay is the firm’s most promising market as Puente Hermanos is the only big player there with an offshore presence.

I also sat down with Christian Babirecki, head of the investment center for Credit Agricole, to discuss the many hats he and his partner Diego Talmon wear. They oversee product selection, investment advisory and relationships for UHNW clients. I finished my day at a new family office that wishes to stay low-profile but works with all of the major players, including Pimco, BlackRock, Pioneer, and Old Mutual.

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Hot topic

Selectors are expecting to see huge inflows toward emerging markets due to the rise of Argentina. Once local regulations in the country are approved and President Mauricio Macri succeeds in winning the midterm elections in November, investors are expecting big changes. It is unclear if there are going to be huge opportunities for foreign managers entering the market, but the country’s regulator said it will be creating new guidelines that build on the demand to invest in the country and its local products. There are currently less than 400,000 brokerage accounts open in Argentina for a population of more than 40 million, which highlights the area’s massive growth potential.

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Trending sectors

  • Brazilian bonds
  • European equity
  • US equity
  • Global High Yield

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Popular groups

  • Pimco
  • Franklin Templeton
  • Amundi
  • Axa Investment Partners

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AIVA get together: (L to R) Diego Iglesias, AIVA; Gianfranco Mantelli, ALTIS; Luis Solorzano, M&G; Samantha; Diego Perez, AIVA

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