Big international money managers - including Templeton, Capital International, Fidelity and Alliance Capital - are intensifying their marketing efforts in Latin America.
Money managers are opening offices, expanding existing operations and/or increasing their trips to the region. Not surprisingly, their efforts coincide with the expansion of pension systems in Latin America and the rising demand for investment vehicles.
The success of Chile's private pension system has helped spawn others in Peru, Argentina, Colombia and Uruguay. Bolivia's system is coming, and Mexico's is set to begin in January. And in Brazil, employer-sponsored private pension plans now have about $60 billion in assets.
Plus, Chile's largest pension fund administrator, Administradora de Fondos de Pensiones Provida SA, Santiago, expects to hire its first international equity managers soon. Provida is likely to choose five or six international managers to manage a total of about $50 million.
Other Chilean pension fund administrators are expected to follow suit. They have been encouraged by Chile's President Eduardo Frei, who has pointed to the need for greater diversification of Chilean pension funds.
"Prospects for getting business in Latin America are very good. Everybody is becoming more global, and more countries are setting up private pension systems," said Donald F. Reed, president of Templeton Investment Counsel Inc., Fort Lauderdale, Fla.
Templeton, which has long invested in Latin American markets, has offices in Buenos Aires, Argentina, and Sao Paulo, Brazil. Both offices handle investment research, but the Argentina office also markets the firm's products to local retail and institutional clients.
Capital Group, Los Angeles, is awaiting Brazilian authorities' final approval of a joint venture between Capital Group International Inc. and Brazilian partner Banco BBA Creditanstalt to create a new asset management company in Sao Paulo.
The joint venture will manage equities and fixed income for the institutional and retail market. Eventually, when legally possible, the new firm will expand its mandate to invest in Argentina, Paraguay and Uruguay.
In addition, effective June 1, Capital International hired Excel Chile, a consultant in Santiago, "to assist us in marketing our products and services to Chilean pension funds or other institutional investors in Chile," said Nancy Englander, senior vice president of Capital International.
Alliance Capital Management, New York, has an office in Sao Paulo. "Our idea is to cover the Brazilian market and that of Argentina and Chile from Sao Paulo, and the northern part of Latin America from New York," said Jean Van de Walle, portfolio manager.
Alliance executives would like to create domestic investment products for Brazilian investors, he said.
Boston-based Fidelity Investments recently received approval to become a pension fund administrator, or AFP, in Chile.
That approval allows it to compete for the management of assets in Chile's mandatory defined contribution pension system. However, Robert C. Pozen, Fidelity's managing director and general counsel, said executives haven't decided whether Fidelity will open an AFP in Chile. Instead, the megafirm could market its offerings as a subcontractor to Chilean AFPs.
Meanwhile, New York-based Citicorp agreed to invest $80 million to obtain an approximately 33% stake in AFP Habitat, Chile's second largest AFP located in Santiago. Citicorp and the Chilean Chamber of Construction, the current controlling shareholder of Habitat, will be equal partners in a new holding company that will control 67% of Habitat, said Susan McKenna, a banking and pension funds analyst for Celfin Financial, a Salomon Brothers affiliate in Santiago.
INVESCO Group, Atlanta, plans to establish INVESCO Argentina SA in Buenos Aires, its first office in Latin America. INVESCO will offer its full range of institutional products and some mutual funds to the retail sector.
Jose Manuel Garrido, chief financial research manager for AFP Provida, said between 100 and 200 managers have visited his firm during the past two years. The visitors included: Robeco Group, Rotterdam, the Netherlands; Scudder, Stevens & Clark, New York; and MFS Asset Management, Boston.
But gathering assets from South American clients will take time.
Most countries have curbs on foreign investing, and attractive local returns make executives think twice about investing outside the country.
In addition, many of the small, new South American retirement systems have limited assets. Peru, where a private system was implemented in June 1993, only has $747 million of pension assets; Colombia has $308 million.
Still, the pension systems are expected to grow rapidly. Mexico's upcoming new private system could have $4.1 billion of assets at the end of 1997 - its first year.
As funds grow, managers will seek more diversification opportunities. Integra AFP in Lima, Peru, would be interested in investing abroad - if we are sure we can obtain a good return," said Jaime Caceres Sayan, president.
Provida's upcoming $50 million foreign stock allocation is only about 1% of its $5.2 billion of assets under management. But that could rise quickly.
"Once we get familiar with international markets, we'll probably see that allocation reaching 10% or so of assets," said Mr. Garrido.
