Report: For Rich Opportunities, Look South

By Trevor Thomas

December 03, 2004 at 07:00 PM

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Wealthy Latin Americans already have placed $117 billion in cross-border asset management products.[@@]

Researchers predict rapid growth in that cross-border asset management total in a report released by Cerulli Associates Inc., Boston, and Latin Asset Management Inc., New York.

Wealthy Latin American investors have put only 3% of their investable assets in the hands of professional money managers outside their countries' borders, and only 2% of that 3% slice is in variable annuities, the researchers estimate.

The researchers estimate that 43% of the $117 billion in actively managed assets, or $50 billion, is in cross-border mutual funds, while 30% lies in managed accounts. Another 15% is in hedge funds.

But the researchers recommend that advisors and financial services companies keep their eyes on Latin American wealth parked in bank accounts and other passive vehicles.

"We believe that even a small shift of this larger pie of passively held investments could substantially raise the amount of private-client cash in funds and managed accounts," the Cerulli and LAM researchers predict.

One reason for the cross-border growth is that competition is likely to explode as several new fund vendors enter the marketplace, the researchers write. In addition, well-to-do Latin Americans are expected to take advantage of recent tax-code changes that remove withholding taxes on U.S. mutual funds held by nonresident aliens.

The researchers also report that global broker-dealers and U.S. wirehouses are slowly losing market share to private banks and smaller distributors. The researchers expect that trend to persist.

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