Latin America records 2nd highest growth for assets under management behind China

As global assets under management soared this year by 12% over the year to Q2 2018, Latin America eclipsed the rest of the world bar China with ground breaking profits. Assets under management in Latin America grew from $1.5 trillion to $1.8 trillion in 2018, an increase of 17% according to a new report by The Boston Consulting Group.

Latin America may only hold a relatively small amount of assets under management by global standards – $1.8 trillion of $79.2 trillion – but that number is growing at one of the highest rates around the globe. Aside from China, which saw its assets under management grow to $4.2 billion up from $3.4 billion last year, Latin America experienced the biggest growth in 2017. 

Globally, the markets returned exceptional results after a year of flailing in 2016, driven by what The Boston Consulting Group considers ‘bull markets’. The consulting firm described the results this years as ‘robust’, saying that the record net flows of 2017 reflected three trends.

“The bull market run encouraging retail investors to allocate more money to investment funds; the growth of wealth in emerging countries, especially China; and the continued flow into pension products to prepare for retirement,” the report stated.

In Latin America, the emerging markets which were featured in the report were Brazil, Mexico, Argentina, Chile and Colombia. These five Latin powerhouses account for roughly 80% of the entire region's GDP per annum and are thus the greatest actors in this department.  

In the past year the majority of these countries have cleared up the shadow which hung over their future, creating a clearer environment for private investors and asset-managers alike. With elections in Mexico and Colombia as well as an upcoming election in Brazil clarifying their agenda and national direction, as well as Argentina taking steps to reenter the international financial scene, the continent seems to be on a sustainable growth path. 

A previous report by PwC released in 2017 identifies a handful of reasons which are drawing investors to Latin America. Political instability between Mexico and the United States is cited as a main factor which is “creating a window of opportunity for European Asset and Wealth Management players.”

The majority of the protagonists in the Latin American boom have also recently experienced falling inflation and interest rates coupled with an increasing exchange rate against both the USD or the Euro. Also noteworthy is the drop in the Pound since the Brexit result. 

Furthermore, a lack of confidence in European financial institutions since Brexit, Trump’s tariff tantrum, and a swing towards populism across the continent has “resulted in European Private Banks and Asset Managers view[ing] Latin America as a strong alternative market.” 

Digital AuM

The report – titled ‘Global Asset Management 2018: The Digital Metamorphosis’ – also cites the coming digital disruption which will affect the industry. “Asset management’s biggest act of reinvention is still to come: embracing the full potential of the digital and analytics revolution.”

“Few asset managers… have mastered digital and analytics at scale,” said Brent Beardsley, a senior BCG partner, former leader of the asset and wealth management segment, and a coauthor of the report. “That requires significant and sometimes complex organizational change. Most firms will need to adopt agile ways of working to achieve that goal.”

“Asset managers that choose to join the smart-beta bandwagon now will need to achieve scale and develop an industrialized approach if they want to be competitive,” said report coauthor Hélène Donnadieu, a BCG principal and global manager of the asset management segment.

The report also touches on agile working methods as a new normal for asset managers. This creates a certain opportunity for Latin American asset and wealth managers who can embrace the digital transition whilst maintaining a personal touch.

Agile and other broad-based tech initiatives are being implemented throughout the rapidly developing Latin American digital economy, providing a stepping stone for talent sourcing and project management. “Agile is particularly applicable to an industry that is high on talent and low on scale,” states the report.