Market Movements

Political Changes In Latin America Drive Asset Flows To U.S. Offshore Market

By 2026, offshore exposure to reach $333 billion, up from $198 billion at the close of 2021

A new report from Cerulli Associates provides in-depth analysis on six Latin American countries with the largest addressable asset management markets—Argentina, Brazil, Chile, Colombia, Mexico, and Peru—focusing on the expansion of opportunities for global mutual fund managers and ETF providers seeking to distribute in the Latin American institutional and affluent retail segments.

November 15, 2022, BOSTON—There has been a resurgence of affluent-investor flows to the U.S. offshore market since 2019, as the Latin American region copes with left-wing governments, swooning real estate prices, and poor outlooks for local currencies and GDP growth, according to Cerulli’s latest report, Latin American Distribution Dynamics 2022: Radical Shifts in Demand Present Challenges for Global Managers.

Top-line growth of the mutual fund industries in Argentina, Brazil, Chile, Colombia, Mexico, and Peru will average 12%, with cross-border exposure growing 15%–18% per year vs. 9%–10% for domestic exposure. By 2026, offshore exposure is projected to hit $333 billion, up from $198 billion at the close of 2021. Most of these new allocations will go to active managers instead of exchange-traded funds, according to the findings.

As affluent investors consider investment options in a challenging political and economic environment, large financial institutions in South America have teams set up to advise clients on their offshore portfolios domiciled in the U.S. and elsewhere. “The increased presence of offshore advisors working in Latin American capitals has been the most important driver helping affluent investors make the leap into the offshore market,” states Thomas Ciampi, author of the report. Nearly $65 billion in fund AUM has been raised via advisor-client relationships in the Mercosur (Uruguay/Argentina/Brazil) and Andean regions (mostly Chile/Peru/Colombia). Global asset managers are actively boosting their wholesaling presence in Latin America, hiring full-time staff and setting up permanent offices around the region.

The market is responding to investor interest in non-traditional products that can’t be obtained in local Latin markets, and global platforms providing independent broker/dealers with a wide range of solutions at the touch of a button. The research recommends that managers consider bringing non-traditional products that can’t be obtained in local Latin markets or funds that are typically offered by large-scale firms.

Given the fragile nature of most regional economies and distrust of the new wave of left-leaning governments, the wealthy will continue to move money outside of Latin America. The challenge faced by global managers is bolstering their ability to service a distribution landscape that has grown increasingly stratified and disaggregated. “While tremendous progress has been made on various fronts, making offshore investing more acceptable and accessible, managers need to invest more time and effort in developing and maintaining relationships with a growing number of financial advisors,” concludes Ciampi.

 

 

 

About Cerulli Associates
For over 30 years, Cerulli has provided global asset and wealth management firms with unmatched, actionable insights.
Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.

 

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