FINANCIAL TIMES: Chile seeks bigger slice of the funds pie

São Paulo and Santiago may seem unlikely rivals for the position of Latin America’s investment management hub. After all, Brazil has a $1tn mutual fund management industry and a 190m-strong population, whereas Chile has a respective $33bn and 17m people.

Moreover, São Paulo was the top ranking Latin American international finance centre in The Banker’s 2012 survey on asset management centres.

But strangely, while Brazil is just waking up to its enormous potential, Santiago’s fund managers have been honing their skills for years. Fernando Tisné, chairman of the Chilean investment association and Latin American debt currency investment director at Moneda Asset Management, is confident that the country can take a bigger slice of the funds pie.

“[Chile has] $10bn under management, almost all domestically. We expect that in the next 10 years we will be up to $25bn and that $10bn will be sourced from foreign investors,” he says.

Brazil is seen as a launchpad for many regional asset management businesses because of its sheer size, Mr Tisné concedes. But over time, the tie-up between the stock exchanges of Peru, Colombia and Chile should improve liquidity and depth, market characteristics which are among São Paulo’s chief attractions.

Mr Tisné adds that Brazil has “too many taxes and capital controls and it doesn’t have a history of being an open economy. I don’t see Brazil becoming a Latin ‘Luxembourg’ and hosting pan-Latin funds, which is what we are trying to do here in Santiago.”

Turning itself into a centre for fund registrations and all the mandates that would bring is a mouth-watering proposition for the Chilean industry.

First, however, the country must tackle its own bureaucracy.

In its Asset Management Insights research series earlier this year, consultancy firm PwC highlighted a “highly fragmented and complex set of regulations, which is hindering Chile’s development as a financial services centre”.

Mr Tisné acknowledges that its taxes are Santiago’s Achilles heel, but a project is making its way through the country’s congress to reduce these taxes, he says. The rapid emergence of São Paulo and the gravitation of a host of companies to Latin America’s largest economy should encourage the congress to take action soon.

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Future centres: São Paulo beats Shanghai to top spot

São Paulo comes top of the ranking of asset management centres of the future, writes Charles Piggott. Despite frustration with government policies, the consensus view from respondents is that they would like to see the development of São Paulo as a regional financial hub for Latin America. Almost all respondents see São Paulo as the preferred hub for Latin investment.

Meanwhile, Shanghai has moved up to second place in this year’s ranking of emerging asset management centres, one place behind São Paulo. Shanghai is developing a clear lead over other mainland Chinese financial centres such as Beijing, Shenzhen and Tianjin. But while many firms are watching regulatory developments closely in mainland China, a number told The Banker that they still feel more comfortable operating out of Hong Kong.

Nevertheless, the potential development of China’s financial markets is likely to have profound longer-term effects on the global asset management industry.

Naïm Abou-Jaoudé, chairman and chief executive of Dexia Asset Management, says: “As the main financial centre of the world’s second largest economy, and one of the largest ports in the world, Shanghai will grow in importance as China is expected to open up its capital account and continue financial reforms.

Financial centres of the future*
     
1 São Paulo 32
2 Shanghai 30
3 Singapore 26
4= Dubai 13
4= Hong Kong 13
6 Doha 10
7 Johannesburg 9
8 Bogota 8
9 Moscow 6
10 Zurich 5
11= Mumbai 4
11= Beijing 4
11= Shenzhen 4
14= Taiwan 3
14= Toronto 3
14= Geneva 3
14= Kuwait 3
18= Seoul 2
18 Istanbul 2
20= Rio de Janeiro 1
20= Liechtenstein 1
* Respondents were asked to rank the five emerging financial centres of the future. Five points were given for first, four points for second, three for third, two for fourth and one point for fifth place
 Source: The Banker’s 2012 global asset management survey

 

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I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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