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

24 July 2018 Consultancy.lat

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. 

Latin America records second highest global growth for assets under management behind China

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.

Brazilian airline Gol teams up with KLM-BCG partnership

15 April 2019 Consultancy.lat

As part of its strategy to digitize its internal operations, Brazilian airline Gol has teamed up with Dutch national carrier KLM and management consulting firm Boston Consulting Group (BCG).

In June last year, KLM and BCG revealed that they had developed an offering that helps airlines leverage technology to streamline their operations “in an unprecedented manner”. The two companies have been working together for over a decade now across KLM’s business, in recent years also focusing on enhancing internal operations through emerging technologies.

Among the projects deployed successfully to date are using internet of things (IoT) and artificial intelligence (AI) to improve Maintenance Repair & Overhaul (MRO) delivery, utilizing digitization to bolster back-office processes (crew resourcing, ground services, supply chain, etc) and using AI to optimize inter-airline network planning with Sky Team partners such as Air France (Frane), Aeroflot (Russia), Delta (US) and Middle East Airlines (Lebanon). 

Flyers, meanwhile, are reaping the benefits of this back-office digitization. Baggage delays – which often have a domino effect and create major headaches for thousands of passengers – have been reduced, flight transfer routing has been optimized for cross-border passengers and information provided has been personalized and tailored to individual customer experience journeys using digital channels. 

Having deployed the offering – branded as ‘Digital Airline Operations’ – successfully within KLM, the airline and consulting firm last year formally launched their offering externally. “Sinds doing so at the IATA-conference we have received positive reactions on our proposition from all corners of the globe,” said René de Groot, chief operating officer at the Dutch carrier company.Brazilian airline Gol teams up with KLM-BCG partnership

Brazil’s Gol has now become the first Latin American client of KLM and BCG’s joint venture. Commenting on the decision, Gol chief operating officer Celso Ferrer said, “We are delighted that we can work together on ‘Digital Airline Operations’. This will allow us to improve our on time delivery to our customers, while keeping our cost per available seat mile among the lowest in the industry. KLM and BCG have developed solutions in the field of advanced artificial intelligence and optimization that we can adjust entirely to meet our specifics. All in all, it will enable Gol to develop a strong competitive advantage.” 

With a fleet size of around 130, Gol is Brazil’s largest international airline, ahead of local rival Azul, and one of South America’s largest players. The airline carries more than 33 million passengers annually and operates 750 flights daily to 73 destinations in Brazil and in South America, the Caribbean and the United States. In comparison, KLM has a fleet size of around 160 aircraft, carrying more than 40 million passengers. The firm is however part of the Air France-KLM Group, which has a total fleet size of over 500 aircraft. 

“Based on artificial intelligence, machine learning and advanced analytics, we help airlines grow, accelerate innovation and streamline operations,” said Nicolas Boutin, head of the global Airline practice of Boston Consulting Group. 

Asked how the KLM-BCG offering differentiates itself from the many digital-led solutions in the marketplace, Dirk-Maarten Molenaar, a partner at BCG said: “We distinguish ourselves from standard IT suppliers by our focus on integrated planning & management, data-driven decision-making in the event of disruptions, the use of our tools by frontline teams and the development of internal digital functions to help improve services.”

Related: KLM partners with BCG to bring artificial intelligence to the skies.