Santander, BBVA, DWS among investors succumbing to lure of LatAm

As the crisis in Europe threatens global economic recovery, investors are looking at more attractive alternatives in emerging markets and turning their attention to Latin America.

Leading Spanish and Portuguese fund managers have long had a close r­elationship with Latin America.

Spain’s Santander Asset Management and BBVA Asset Management, and Portugal’s Espirito Santo group are already well established in the region.

The appetite and apparent ­success of local Spanish and Portuguese firms has proved contagious, with several international firms using Iberia as a springboard for new ­business from Mexico to Argentina.

For instance DWS ­Investments, part of the Deutsche Bank group, began ­covering Latin America from Madrid in 2005 and says it has built a solid business from there.
Latin America’s appeal has also encouraged more firms in Europe to look across the Atlantic.

Schroders has just launched a new Brazil equity fund; Neuberger Berman recently opened an office in Buenos Aires; Dunas Capital launched a Brazil fund; and Barclays Wealth boosted its Geneva-based Latin America team.

Latin appeal

Pimco, too, recently expanded its Iberia team with three new hires. “Everyone is moving there,” says Gian Luca Giurlani, head of Iberia ­business development responsible for ­distribution in Southern Europe.

Pimco covers Latin America directly from its US office, but there may be opportunities arising from leveraging its established ­business with some of Spain’s major banking clients, he adds.

Brazil is the largest economy in Latin America, with between 85% and 90% of the region’s asset management market.

It has attracted a large amount of ­investments and attention, but other countries have also seen rising interest and activity.

Overall, Latin America’s asset management industry is estimated to be worth about $1.24trn, having risen from $1.02trn in 2010 and this is expected to double within five years.

According to a Cerulli Associates report on Latin American Distribution Dynamics, published in August, there was a 23% rise in assets under management in 2010 in the region, bringing total assets above $1trn.

Assets were helped by strong ­corporate investor flows in Mexico and high interest rates in Brazil, which helped boost returns, it says.

“It is difficult to predict many more 20%-plus gains going forward given the maturing of the Brazilian market,” it adds.

“We cannot rule out the ­possibility. In fact, we are projecting average annual gains for the region to be around 15% in US dollar terms, though weakness in the greenback can lead to important distortions.”

Provided currency valuations hold, Latin American mutual fund AUM could rise above $2trn in 2015, the report says.

Mutual fund flows in Latin America have averaged $60bn to $70bn per annum since the financial crisis in 2008, with the bulk of investments in fixed income funds, though equity and hedge funds have been gaining ground.

Growth in the mutual fund segment has come primarily from institutions and affluent investors; less so from traditional channels such as retail bank branches.

With the outlook set for further strong growth, investment managers are eager to explore rising business opportunities in the region.

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