International money managers are targeting the Spanish mutual fund market, but Spanish investors so far are saying "ma?ana."
The problem is that individual investors are extremely conservative. More than 90% of the 10.9 trillion peseta ($84 billion) Spanish mutual fund market is invested in bonds. Diversification into stocks - much less overseas securities - is a long way off.
What's more, the Spanish mutual fund market is dominated by domestic banks, which control more than 90% of the market.
Nevertheless, the potential is tremendous. In only five years, the Spanish mutual fund industry has become the fourth biggest in Europe. Experts project mutual fund assets will grow to 15 trillion pesetas ($279 billion) by 1997.
Foreign-based managers are angling for a way into the market.
In the most important move to date, New York-based Alliance Capital Management last year entered into a joint venture with Banco Bilbao Vizcaya, one of Spain's leading banks.
Through its mutual-fund arm, Privanza Gesti¢n de Capitales, the bank is Spain's second-largest purveyor of mutual funds, managing 1.37 trillion pesetas ($1.06 billion), a 12% market share.
Through BBV, Alliance is offering four international and emerging markets funds. BBV helps manage Alliance's two Spanish equities fund, which are offered to the New York manager's international clients. BBV also has acquired about 3% of Alliance's stock, according to sources.
A similar joint venture, although on a smaller scale, exists between Caja de Catalu?a, Barcelona, and the Cie. Financiere Edmond de Rothschild, Paris, a branch of the Rothschild Group.
Spanish banks also enter joint ventures to tap overseas markets. For example, Banco Santander, Spain's mutual fund leader with a 15.6% market share, and the Newton Investment Management Ltd., London, formed Newton Santander Investment. The venture is 60% owned by the Spanish bank and 40% by Newton.
"We joined Newton to market our funds in England, hand-in-hand with a prestigious independent manager, which will give credibility and marketing for our products," said Eduardo Suarez, deputy counselor of BSN Gesti¢n, Banco Santander's mutual fund unit, based in Santander. In return, Newton can rely on the Spanish bank's local expertise.
The strong growth experienced by the mutual fund market in recent years has led to the arrival of other leading international money managers, including Lloyds Bank, Midland Bank, Chemical Bank, Deutsche Bank, Citibank, J.P. Morgan and Musini Bankers Trust.
Foreign firms have a total market share of less than 1%, but Spanish firms fear their competition - especially if a proposed liberalization of the European Commission's UCITS Directive, governing mutual funds, is approved by the European Parliament.
Once barriers are removed to marketing these funds across borders, foreign investment products that have seen strong growth abroad will reach Spain. EC Internal Market Commissioner Mario Monto, however, said he may abandon a proposal to free up cross-border marketing of cash funds.
The international managers have found business in the sale of emerging market mutual funds, although Spanish legislation bars investment in markets in Eastern Europe, Asia or Latin America, except for Mexico and Argentina.