Since the opening of its Madrid office back in 2007, Threadneedle Investments’ Spanish arm has gone through various phases in the local market, which was first hit by the global financial crisis, has then started a long series of consolidation activities and is now starting to raise its head again.
Traditionally focussed on distributing fixed income products, which suits average Spanish investors best and have recently returned 14-15% yields to investors, Threadneedle is now looking to evolve its opportunities. Ruben Garcia, director general Iberiaand Latam at the Madrid office says that business is being promising in Spain as well as in Portugal and that the next frontier will be Latin America.
“The Portuguese market has offered many more opportunities than we had thought, especially in the equity space. It is a small but very loyal market,” Garcia says.
Garcia has spearheaded Threadneedle’s office in Madrid since the end of 2006, setting it up from scratch and almost immediately found himself to manage investor expectations in front of the crisis in Iberia and Latin America. “The worst is over now, and we are actually starting to enjoy a more positive period with flows returning to go into asset management products. As of today, we have agreements in place with the country’s major banks such as Santander, BBVA, Caixabank and so on. A whole new set of channels has opened up to distributions over the last years to tune in with a more open architecture structure. We cover fund of fund managers, pension fund managers, as well as of professional investors fund managers,” Garcia explains.
As part of the local market evolution, a second segment is now starting to emerge in the distribution space: that of intermediary. In a financial services sector strongly dominated by banks, independent or partly independent intermediaries are starting to slowly gain ground, Garcia says. “The field is still quite limited and a model comparable to that of IFAs has just recently starting to appear in Spain, where independent intermediaries are about 2%. In this respect, Spain is slightly behind compared with other countries like Italy for instance, where the evolution of the industry is definitely a step ahead. However, we do look at that space with interest as the industry is definitely moving toward a more sophisticated, open model,” he says.
At present, however, the main segment for Threadneedle’s distribution in Spain is that of private banking and institutional business in general, where Garcia says things are starting to open up more too. “However, the pension fund side remains still quite closed,” he points out.
LatAm spots of interest
After Spain and Portugal comes Latin America. Garcia says that Threadneedle sees great opportunities in the continent, where it has started to enter recently through the Miami gateway. “Chile, Peru and Colombia is where the money is right now, while Mexico is just starting to rise. However, Brazil is the next big promise for us, as no one is really looking at it and it has not opened up as much yet. Miami is big for private banking and Chile for its huge pension fund, that is where I’d say the focus at the moment,” he explains.
Although the offer has been traditionally focused on fixed income products, the improved market conditions have allowed Threadneedle to expand the radar of its offering to the Spanish market.
“We are selling fixed income products, but also credit opportunities products which offer 3-4% yield every year with a very low volatility. The average equity exposure has also grown in the last 14 to 16 months; also European small and large caps proved to be very good equity products going from 5% to 20%. Investors remain concerned of high yield and they are looking at EM debt as a result, especially from the institutional side of the market,” Garcia says.
Although the company’s offer is quite wide, Garcia admits that selectors in the country mainly choose among a limited range of 10 funds, in a bit of a consolidation move. “Some concerns remain, but there is enough room to have growth for most players and I would say that the momentum for the industry in Spain is very good,” he concludes.