LatAm AUM growth to outpace Asia’s: BNPP IP

Asian investors should look to Latin America, says BNP Paribas Investment Partners, which aims to grow its emerging market portfolio to at least a fifth of its total AUM.
LatAm AUM growth to outpace Asia’s: BNPP IP

As India and Indonesia enjoy election-related stock market rallies, BNP Paribas Investment Partners is optimistic on emerging markets in general. But the French fund house says Latin America, rather than Asia, will be its main source of asset growth in the next few years.  

The growth of AUM in LatAm will outpace that in Asia Pacific, with estimates pointing to a rise to $5 trillion by 2022 from $2.3 trillion at end-2013, notes Ligia Torres, London-based head of Asia Pacific and emerging markets. And when that happens, LatAm AUM will have outstripped the figure for China, she notes. 

With €60 billion of BNPP IP’s global AUM of €473 billion coming from emerging markets, Torres says the firm will increasingly invest in Colombia and Peru with a view to boosting EM assets to €95 billion by 2016. It is also is building up its platform in Mexico, including recruiting an investment team there.

The challenge for LatAm is that investment has traditionally gone largely to three markets – Chile, Mexico and Brazil. However, she sees attractive opportunities in markets such as Colombia, where the firm has an office.

BNPP IP is also present in Chile. Since 2008 it has partnered with the third largest bank, Banco Estado, to offer fixed income, money market and equity products to retail clients banking on Banco Estado’s network. It also targets corporate and other institutional investors. The country also has a sizeable pension segment that is scouting for investment opportunities offshore, says Torres.

These markets are attractive to BNPP IP because their governments are pushing asset owners to invest offshore. They are deprived of enough investment products manufactured locally to be able to put their money to work, she says.

While emerging markets have suffered outflows since May 2013, on the back of taper talk from the US Federal Reserve, there are signs that investors are starting to return.

EM equity funds received inflows of $2.5 billion in the week to April 2, with China, India, Brazil and Russia receiving the biggest inflow, according to media reports citing EPFR Global. Meanwhile, EM debt took in just over $1 billion in the same week. These were the first weekly inflows after $50 billion fled EM bond and equity funds during the first quarter of this year.

LatAm-to-Asia flows have also been significant. The upcoming election in India, for example, has boosted sentiment. The CNY Nifty index is up 6% year-to-date, on hope that opposition leader Narendra Modi will be voted in as prime minister on May 16.

Nikhil Johri, head of BNP Paribas Asset Management India, says in recent months he has seen inflows into India funds from pension schemes in Chile.

One reason for this is the view the India rupee is more stable than the Chilean peso, he says. In part, such inflows from LatAm investors have replaced flows from those from the US and Western Europe, Johri adds.

Meanwhile, Vincent Camerlynck, Asia-Pacific CEO at BNPP IP, says he hopes the firm’s local Asian investor base will shield it from any further drop in interest among institutional clients unfamiliar with Asian emerging markets.  

In Asia, BNPP IP manages €40 billion of assets, of which €34 billion is manufactured and invested locally. That figure includes assets sold to both Asian and non-Asian investors. The remaining €6 billion represents overseas assets sold into the region and manufactured outside Asia.

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