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.
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*|
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|* 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|