Mexico is one of Latin America's fastest growing asset management marketplaces. Latin Asset Management estimates that the combined AUMs of the mutual and pension fund industries of Mexico will rise to over US$500 billion by the year 2015, making it the second largest market in Latin America, behind Brazil.
In 2011, both industries continued to enjoy nearly unfettered expansion, while positive regulatory and distribution trends took hold that seemed destined to guarantee robust growth in the coming decade. The private pension fund industry’s assets have surpassed US$120 billion, while the mutual fund industry has grown 100% in the last three years to reach US$100 billion in assets.
Pension funds
According to our projections, by 2015, Mexican Afore pension fund managers will have amassed close to US$270 billion in assets, possibly converting themselves into the largest pension managers in Latin America. The Afores gained the opportunity to invest internationally beginning in late 2004 and have shown a large appetite for international risk of late. Regulatory changes in 2011 allowing investment in cross-border mutual funds and separate accounts have renewed the interest in the Mexican market on the part of international asset managers. International investing and equity investing as well will earn greater focus in coming years, now that the industry has adopted a five-fund “multifund” system, allowing younger workers to bias their investing toward equities.
Mutual funds
The opening of the Afore market complements an extremely liberal set of international investment rules for Mexico’s mutual fund industry. Hundreds of thousands of new investors are entering the mutual fund market every year, and important strategic opportunities are emerging for both local and international mutual fund firms. Independent and third-party distribution have taken off, and the fund-of-funds model is increasingly being utilized by local managers as a way to access global markets. Given the growing sophistication of mutual fund investors, diversified product offerings and improved financial planning will be critical to success in the local market
Corporate pensions
The corporate pension business has grown more competitive and is increasingly a target for independent fund firms seeking to penetrate the institutional segment. These independent firms in turn tend to emphasize international investment alternatives, especially mutual funds allocating to third parties. While corporate pensions have been operating for decades in Mexico, the voluntary retirement business overall is due for a revamping in the medium term in order to compensate for the lack of adequate incentives to save for the long term on a tax-deferred basis. The event is intended to address the next phase of growth for asset management business, as well as the opportunities that will emerge from it. As always, our overall goal is to help stimulate debate and work toward the development of a robust, thriving asset management business in Mexico, and to work to help the country overcome common barriers faced by young fund management industries and thus mature more rapidly. |
