Latin America’s retail market is offering new avenues of revenue for international cross-border asset managers and is quickly emerging as a promising alternative to its institutional market, according to a report from Latin Asset Management.

The findings were published in ‘Latin American Distribution Dynamics 2017: Re-Emerging Opportunities for’Cross-Border Firms Amid Regional Recovery’, a report developed in partnership between Cerulli Associates and independent research firm Latin Asset Management.

It stated that new pro-business leaders in key Latin American countries as well as the success of recent tax amnesty programs have led many global asset managers to reinforce their marketing and distribution efforts in the region.

Cross-border asset managers have never had such an open playing field in the Latin American retail market, said Thomas Ciampi, founder and CEO of Latin Asset Management.

‘From Mexico on down to Uruguay, global sponsors are finding new avenues to reach wealthy investors,’ Ciampi said. ‘They are landing more business from local asset managers via subadvisory agreements and funds of funds, and are creating new relationships with in-country private client distributors that often rival large global private banks in terms of their advisor headcounts.’

The recent success of tax amnesty programs and global information-sharing agreements have also contributed to expanding the addressable market available to local wealth managers and global asset managers as the number of tax-compliant clients rises.

The report states that this new reality is encouraging these clients to seek out advisory relationships in-country, often with Latin-owned wealth managers best able to carve out solutions using local and cross-border instruments.

Institutional issues

This rise in demand from the retail market comes as asset-gathering among the AFPs and Afores begins to stagnate. For the first time in five years, Mexico’s Afores reduced their exposure to international investments, despite funding a series of international mandates with global asset managers.

In Chile, the AFPs have been impacted by public protests calling for a changes to its privatized system. Among them is a debate over who will be charged for the so-called ‘phantom fees’, management fees charged by asset managers - both local and global - for investing in mutual funds that are currently charged to pension savers.

In Peru, AFPs were recently granted a small increase in their international investments, from 42% to 43%, way off the 60% the industry is asking for to allow them to invest freely offshore.