BBVA leverages ESG expertise in ETF redesign; plans megatrend-fund launch

Roughly a year after the launch of BBVA Asset Management’s first ESG fund, the firm has redesigned its flagship ETF to have an ESG focus.

The ETF – MEXTRAC – has roughly USD 522 million in assets under management from local clients, and now follows the S&P/BMV IPC CompMx Rentable ESG Tilted index.

According to CEO Jaime Lázaro, the ESG trend is here to stay, and with most of his team having gotten the ESG certification from the CFA Institute, it made sense to redesign the very successful MEXTRAC.

While he doesn’t expect any more redesigns, Lázaro told Fund Pro Latin America that BBVA AM is considering launching a new ETF with exposure to global equities, as well as two equity mutual funds and a fixed income one.

“One of the equity funds will provide exposure to megatrends, specifically, environmental, demographic and technology themes, while the other one is still to be determined,” he said. On the fixed income front, Lazaro has a local long-term-debt fund in the pipeline.

The firm currently offers 52 funds from its five families: fixed income, equities, multi-assets, multi-strategy, and strategy funds, which include subadvisory from four international asset managers: Schroders, Amundi, JP Morgan and Morgan Stanley. It also has three ETFs, the MEXTRAC, the CHNTRAC, which grants exposure to China and the FIBRATC, that follows the Mexican REITs, or FIBRAs in Spanish, index. BBVA is also one of the champions of open architecture in the country.

According to Lazaro, these offerings can allow for a more sophisticated diversification, with the themes and geographies clients want to be exposed to, while at the same time keeping an eye on volatility and returns. “Even in passive offerings, we make sure that the underlying index can create value and outperform the broader market.”

Considering that many times retail clients are behind the market (for example, they buy when equities are high and after interest rates fall), building strong portfolios that perform in most scenarios is a priority for Lazaro. “We aim for helping clients achieve proper diversification.”

In his opinion, this is one of the reasons of their leadership in the Mexican fund industry. “Our assets under management are a testament of how good we are servicing our clients,” the CEO said.

BBVA AM is also very focused on growing their already dominant market share with the help of digital tools. Its funds are available to any client of BBVA through the bank’s online app. “Nowadays over 85% of our funds’ operations happen via our digital channels,” Lazaro concluded.

According to Fund Pro Latin America, BBVA Asset Management had USD 28.2 billion in assets under management as of March 2022, raised through domestic mutual funds.