Building your gateway toLatin American investors

A guide on how to accessthe top fund distributionmarkets in Latin America

Executive summary

Executive summary

BNP Paribas Securities Services and SAGALINK consulting have teamed up to provide asset managers looking to expand their business into new territories with insight on the distribution opportunities in the Latin American region.

Today, the region accounts for 4% of the world’s global assets under management1. Brazil leads the investment fund industry in the region, ranking 6th worldwide with over USD 1,071 billion assets under management and 7,500 investment funds. The fund industry in Chile, Colombia, Mexico and Peru is also on the rise and offers interesting opportunities in terms of investments and distribution for new international entrants.

In parallel, the increasing appetite in foreign assets by Latin Americans is a crucial driver for business expansion by international asset management companies in the region. This interest in foreign investment is mainly driven by quantitative easing program in the US, the volatility of local interest rates, the slowdown in local economic growth and stock markets and a growing middle class with increased wealth and savings – strong indicators that there is clearly a need to identify additional investment opportunities and reinforce portfolio diversification.

Setting the scene

Economic indicators show that Latin America is a burgeoning financial industry.

Wealth in the private sector is escalating in the region. As at 2012, there are 14,750 Ultra- High Net Worth individuals accounting for a total USD 2,185 billion in assets2. And with a population of over 400 million, these figures are expected to grow even further.

With 16 Latin American pension funds belonging to the world’s global Top 300 ranking in 2013, the pension fund industry is one of the most powerful amongst emerging markets and particularly mature even amongst developed counties. They are well funded due to a younger working age population and mandatory contributions. Also, regulations limiting pension funds to invest mainly in domestic markets are relaxing.

Both private and institutional sectors are moving towards diversification of their investment strategy outside domestic borders. This is creating opportunity for foreign asset managers willing to access Latin Americans investors.

In this publication; we concentrate on 5 key markets: Brazil, Chile, Colombia, Mexico and Peru – providing factsheet style country profiles that detail the major economic indicators and players across the financial sectors.

The quest for expansion

Although the region is experiencing interesting political and financial integration initiatives, a regional approach to distribution can become complex when taking local particularities into consideration. This is why the proper understanding of each market, together with expertise on local investors, operational practice and regulatory requirements could turn into a real competitive advantage.

The publication concentrates on how to set up distribution programs and indicates best practices and strategies to consider prior to entrance in Latin America.

Key elements to consider are:

¡ The fit of its investment products with local expectations and targeted investors

¡ Creation of brand credibility and recognition

¡ Choice of distribution method and channels

¡ Implementation of the correct operating model

Executive summary

Putting theory into practice

A number of international asset managers have already entered the region. We have chosen two different case studies and presented an analysis of their overall experience, identifying key success factors for fund distribution in Latin America:

¡ Develop a strong brand image locally by capitalizing on your international reputation

¡ Demonstrate a good track record and proved expertise in a particular domain of investment management

¡ Deal efficiently with specific local regulatory, fiscal and operational constraints

¡ Consider management fees as an important competitive factor, especially when dealing with highly sophisticated and experienced institutional investors

¡ Establish an on-the-ground sales presence as building long-term relationship is an important feature in all Latin American countries

BNP Paribas Securities Services and SagaLink Consulting have shared our respective convictions, regulatory and market knowledge to author this publication. We trust it will present useful insight and actionable guidance in building your distribution strategy in Latin America.

We look forward to facilitating your future fund distribution opportunities in this region.

Sources for all figures can be found within the document

Executive summary

Building your gateway toLatin American investors

A guide on how to accessthe top fund distributionmarkets in Latin America

The information contained within this document (‘information’) is believed to be reliable but BNP Paribas Securities Services does not warrant its completeness or accuracy. Opinions and estimates contained herein constitute BNP Paribas Securities Services’ judgment and are subject to change without notice. BNP Paribas Securities Services and its subsidiaries shall not be liable for any errors, omissions or opinions contained within this document. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For the avoidance of doubt, any information contained within this document will not form an agreement between parties. Additional information is available on request.

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In the U.S., BNP Paribas Securities Services is a business line of BNP Paribas which is incorporated in France with limited liability. Services provided under this business line, including the services described in this document, if offered in the U.S., are offered through BNP Paribas, New York Branch (which is duly authorized and licensed by the State of New York Department of Financial Services); if a securities product, through BNP Paribas Securities Corp. or BNP Paribas Prime Brokerage, Inc., each of which is a broker-dealer registered with the Securities and Exchange Commission and a member of SIPC and the Financial Industry Regulatory Authority; or if a futures product through BNP Paribas Securities Corp., a Futures Commission Merchant registered with the Commodities Futures Trading Commission and a member of the National Futures Association.

Printed on recycled paper by Edit’overso – Designed by the graphics department, corporate communications, BNP Paribas Securities Services – February 2014