Latin America cross-border allocations from pension and mutual funds will exceed US$350 billion by 2018 as new research from global analytics firm Cerulli Associates found.
«Although most mutual fund markets in the region are investing less than 5% of total assets abroad as result of the heavy bias to local products, the size of the potential opportunity cannot be ignored,» states Nina Czarnowski, senior analyst at Cerulli. «An increase of 1% in allocation translates to an additional USD$20 billion in inflows to global managers.»
Cerulli’s annual report, Latin American Distribution Dynamics 2014: Entry Points to Emergent Economies, analyzes distribution and product development trends in the six key local mutual fund and pension fund markets–Brazil, Mexico, Chile, Colombia, Peru, and Argentina.
«Pensions will continue to be the largest buyers of cross-border instruments. We predict that cross-border allocations by the pension markets in Latin America should more than double over the next 5 years, with Chile expected to hold its position as the largest regional allocator to cross-border vehicles,» Czarnowski explains.
According to Cerulli’s research, while the current size of the marketplace is an important factor to global managers wishing to expand in Latin America, growth potential, market saturation, and integration with global markets should not be underweighted. Having a long-term commitment is crucial in a region that continues to progress, albeit slowly.
«The region needs to educate industry professionals and investors to reconcile the difference between investors’ high ability and low willingness to take on risk,» Czarnowski continues