Report: Latam Offshore market strengthens while US Offshore increasingly Miami-centric

The US offshore market accounts for more than half of the USD 105 billion raised by cross-border asset managers in Latin America with Miami gaining increasing market share, according to a report authored by Latin Asset Management and published by Cerulli Associates.

The report, entitled Latin American Asset-Gathering Strategies 2016: Cross-Border Distribution to High-Net-Worth and Pension Markets, analyzed flows into the Latin American market which they divided into three channels: the US offshore, Latin American offshore an Latin American onshore markets. For more information on this report, click here.

“According to our estimates, the overall size of the three asset-gathering segments stands at USD 105 billion, with the US offshore segment accounting for more than half of the total at USD 56 billion,” said Thomas Ciampi, founder and director of Latin Asset Management.

Within the US offshore market the report stated South Florida, mainly Miami and Coral Gables, accounts for an increasingly lopsided amount of overall AUM, with close to 60% of assets within the wealthy investor segment, while Texas (Houston and San Antonio), New York, and the West Coast (mainly San Diego) have lost importance.

“The US offshore market has been quite unstable since the 2008 financial crisis,” the report stated, “with the shrinking of staffs among large banks, other companies deciding to exit the business, and increased red tape and compliance issues for those firms deciding to stay. Just a handful of large distributors remain in the US – among them are Morgan Stanley, UBS, Citi, and Merrill Lynch.”

While the US offshore market accounts for the majority of raised assets by cross-border asset managers, the Latin American offshore market is growing, according to the report.

Among the reasons are: sophisticated distribution tactics, enhanced technology offerings of product services, greater client trust in local advisors, and changes in the profile of the typical wealthy investor residing in the region.

Asset gathering from within Latin America has become more critical in recent years and this local growth has come at the expense of US offshore booking centers such as South Florida, Texas, and New York.

However, the importance of maintaining a presence in the US offshore market should not be discounted. Asset managers should remain focused on serving clients in key locales such as Miami, which is bustling with activity.

Within Latin America, Argentina’s difficulties during the last decade led to an increasing amount of asset gathering activity in the Buenos Aires area and also Uruguay, making the zone the most important for asset gatherers. About 45% of overall cross-border fund AUM comes from these regions, the report stated.

Meanwhile, there was sizeable business being done in Colombia, Brazil, and Chile as local financial entities and independent advisors – which have stepped in to fill the void left by fleeing global players – readily offer cross-border solutions to their well-heeled clients.

Demand for offshore solutions from these clients has increased in light of weak local economies, weak currencies, flat-lining local stock markets, and falling local real estate.

On the pension fund side, Chile remains a driving force for growth for active managers, while in Peru, Colombia, and Mexico, ETFs’ dominance continues.

Ciampi added: “A factor that differentiates the market in Latin America is the perceived risk of the home country, in terms of political risk, personal security, and stability of markets and currencies.”

“For residents of countries who are passing through difficult times, or have volatile leadership unfriendly to foreign companies, such as Argentina or Venezuela, investors are of course eager to shelter their assets from the local banking system.”

“In countries such as Mexico, Chile, Colombia, and up until recently Brazil, the wealthy may seek to have some of their savings offshore, but are still comfortable putting their money to work in the local economy or saving in locally domiciled financial instruments.”