In Brazil, the name of the game for international asset managers to tackle the market is distribution, according to Isabella Nunes head of sales Brazil J.P. Morgan Asset Management.
During the ‘Finding joy in Latin America (LatAm)’ panel at the Association of the Luxembourg Fund Industry (ALFI) Global Distribution Conference, Nunes said the bulk of assets under management is with the main banks in Brazil.
“The top five banks in Brazil have roughly 60 per cent of the market but net flows are coming through platforms so it is important to serve all channels and have partnerships with major distributors in Brazil,” Nunes notes.
Nunes highlights that partnerships and having different types of clients is crucial for business growth. She adds: “I see a huge opportunity for the Brazil market. I have been covering international business in Brazil for the past 17 years and for the first time I really see a shift in the demand and appetite for investors to really know and understand the opportunities here.”
Historically, there have always been three main obstacles that hold back the expansion of the global investment industry in Brazil: the lack of open architecture, high levels of interest rates, and a lack of favourable legislation.
For the first time, however, Nunes says “we now see those pillars align in our favour, acting as a tailwind for global managers in Brazil”.
Meanwhile, it was noted that Chile is a successful example of a country that is developed in terms of diversification. “From the point of view of an asset manager, it is an important market to be in,” Nunes affirmed.
Discussing opportunities for international asset managers in LatAm, Nunes affirmed: “Brazil is just the beginning. The appetite is growing from all types of clients such as pension funds. The local relation that global diversification brings to local assets and the possibility of accessing different regions and sections that are positioned to grow, and these are great benefits.”
Looking at the current landscape of LatAm as a whole, Jorge Aguiló partner and country head, Compass Group USA, said: “We have been investing in LatAm for a long time (more than two decades). From a top-down perspective LatAm benefits from a supportive global environment with ample liquidity, depreciated domestic currencies, low interest rates and controlled expected inflation levels.”
He explained: “There has been a strong macro recovery after a very weak 2020, as a result of the industry being hit hard by COVID-19. Covid response took a while, but now vaccination programmes are working well in Chile, Brazil and Mexico, with rapid increase in vaccination rates, reduction in cases and reopening of the economies. The region has changed a lot and there is possibility to do fiscal stimulus and maintain lower rates than historically has been the case. LatAm has benefited from ample global liquidity. We are exporters to the world of commodities and these high commodity prices support the local economies.”
Aguiló highlighted: “Fundamentally companies are very healthy especially in Brazil. Most of the flows have gone to Asia and to global emerging markets. LatAm is looking very cheap against historical levels. LatAm also continues to be a rich environment of companies to choose from, with value and growth opportunities.”
The major winners in LatAm, according to Aguiló, will be Mexico and Brazil; Mexico because of its close proximity to the US, from a manufacturing and location base, it is very competitive against China. Additionally, free trade agreements are already in place in Mexico.
Brazil will also be a winner due to its still low interest rates and the ability to be extremely dynamic. It's a large market, with new IPOs and sectors coming into the universe. The equity market has also been growing rapidly with digitisation in this country.
“There are very interesting opportunities here. I think LatAm is very attractive from a bottoms-up perspective.We are seeing larger allocators focusing and using regional specialists to get that alpha, there is more diversification of sectors, old economy (commodities and exporters) and new economy with domestic services and technology companies”
Carlos Rodriguez de Robles, deputy CEO, Caceis, commented: “LatAm is an opportunity in terms of the diverse asset choices that you can have.”
“In Brazil, Caceis is a local player, and we have local teams that know the regulator very well, and we interact with the different market infrastructure that allows us to be very agile. At the same time, we can offer clients a regional flavour. We can facilitate entrance to the region.”
“LatAm is a good opportunity, the timing is good, and do not be afraid of the complexities. Caceis is a one stop shop and we can help with it.”
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