U.S. Anticipates Influx of Latin American Pension Investments

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Latin America’s pension funds are looking to invest beyond their borders, and that means billions of dollars of pension investments flowing into the U.S., according to new projections from research firm Cerulli Associates.

Latin American countries have seen major growth in retirement assets in recent years as more workers are subject to mandatory retirement contributions. Such countries – Brazil, Peru, Chile, Columbia and others – are now looking to invest those assets abroad.

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Latin American pension funds are expected to double their allocation to international and U.S.-based funds over the next five years, according to an analysis from Cerulli Associates.

So-called cross-border allocations from Latin American pension and mutual funds will exceed $350 billion by 2018, the Boston-based research firm projected.

That should be welcome news to U.S.-based fund companies that have been seeking to expand their business in Latin American markets, which tend to be restrictive when it comes to giving their plan participants access to U.S. equities.

Most mutual fund markets in Latin America invest less than 5 percent of total assets abroad. Cerulli attributes this in part to investors’ bias to their home markets.

Regulations also stand in the way, though they differ by country, with some Latin American governments allowing greater access to foreign markets than others.

U.S. fund managers have hoped for greater penetration into Latin America, but progress in developing key markets has been slow, according to Cerulli.

That said, opportunities exist, and may be opening up. Mandatory worker contributions into private pension systems in Chile, Mexico, Columbia and Peru continue to support growth of retirement assets in those countries, and Cerulli notes that pension regulators are showing a greater intent to open their borders to foreign investments.

Some countries are more willing than others to invest outside their borders.

Chile, for example, has already shown enthusiasm for such a strategy; as of 2013, 42.4 percent of its pension assets were invested in foreign countries.

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