With US$125 billion in assets held by asset managers and private pension funds, Colombia is Latin America's fourth largest market in terms of AUM, behind Brazil, Mexico and Chile. Off the radar of most global fund firms through most of the last decade, the asset management industries of Colombia have quietly flourished, benefiting from a stable regulatory environment and a booming economy.
Colombian capital markets have enjoyed record volumes, foreign investment is soaring and there have been important advances in the standard of living, giving rise to a new class of mass affluent investors.
The Colombian private pension system has been gaining a lot of attention from global asset managers, as the industry seems poised to replicate the experience of AFPs in Chile, the most mature pension market in Latin America. Colombian AFP pension managers stand today where Chile was at the beginning of the 2000s. Colombian AFPs have amassed close to US$50 billion in assets, which is where Chile stood at the close of 2003.
But the comparisons go beyond pure market size. For example:
- Chile converted to a multifund system in 2002, and Colombia is about to make the same step;
- Chilean AFPs were investing just 11% of their assets in cross-border funds and ETFs in 2002, while in 2009 Colombian AFPs invested 11% of their AUMs in cross-border vehicles;
- Chilean regulators in the early 2000s limited cross-border investment below 30% of total AUM, while in Colombia the limit is a more generous 40%.
While the Chilean AFP system has expanded from US$50 billion to US$116 billion between 2003 and 2009, the younger and broader Colombian AFP system has the potential to ramp up faster that its Andean neighbors, as inflows into the compulsory pension system are double that of Chile's. In fact, by 2014, Latin Asset Management and Cerulli Associates estimated that the industry will grow to US$121 billion, with 30% - or US$36 billion - invested offshore. Compared to the current levels of cross-border allocations of the AFPs, the opportunity for global firms on the pension side alone amounts to roughly US$30 billion in the next four years.
So we believe it is time that global firms start paying much more attention to Colombia, and begin to understand the market dynamics there, not just in the pension arena but in the asset management sector, which is flooded with institutional money, and the voluntary retirement segment, which offers Colombians a way to save tax-free in order to supplement their pension payouts.
The Seminar on Asset Management in Colombia is a mix of value-added presentations for international and local experts: on the one hand, the Seminar provides a venue for developing relationships with local asset management executives while giving global firms an opportunity to raise their profile in Colombia; on the other, it features illuminating discussions on local-market issues in terms of product development, distribution, portfolio management and regulation, useful to both local players and international providers.
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