Treasury Dept vs. SEC?

The Department of the Treasure threw down the gauntlet with “the executive branch’s plan to promote vibrant and diverse investment and savings opportunities through asset management and insurance”.

Treasury Report on Asset Management and Insurance

Citing the US asset management and insurance markets as the global leaders for diverse investment opportunities and vibrant capital markets, the treasury department in its 176-page report says that post financial crisis regulation might have gone too far, and that asset management firms and insurance companies have different legal, structural and operational characteristics than banks.

To better address systemic risk and solvency, the report highlights:

– entity-based systemic risk evaluations of asset managers and their funds are not the best approach for mitigating risk;

– instead, primary federal and state regulators should focus on systemic risks from products and activities and on implementing Regis that strengthen the asset management and insurance industries as a whole;

– a strong liquidity risk management framework is more effective in addressing liquidity risk than stress testing of asset management firms;

– the state insurance regulators and the Fed should harmonize their respective ongoing domestic work on insurance capital initiatives, as well as continue their efforts to assess liquidity risk management in the insurance sector.

Let the games begin.

The Compliance Strategy Institute held numerous workshops with compliance and risk executives globally and is developing global thematic task forces to discuss approaches for asset managers, individually and industry-wide.

Compliance Strategy Institute Firms and Speakers

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VIII Congreso Fiap-Asofondos … Regional long-term fund investment review 

Over the last two days, Asofondos and the Federación Internacional de Administradoras de Fondos de Pensiones (Fiap) hosted their eighth annual round table focused on macro economics, long-term investing and pension funds. 

  

Held in Cartagena, it brought together investment managers and institutional investors from Colombia, Chile, Peru and Mexico. 

Nobel laureate and MIT professor Peter Diamond and President Santos were the keynote speakers. Asofondos president Trujillo compared the country’s demographic pension issues to Japan. 

Aside from longer life expectancy, individual contributions are too low and overall regulatory impetus needs to be on investor incentivation and education. As of February 2015, private pension funds had about $158 billion in AUM.

In addition to associations and government representatives, fund executives included BTG Pactual, Pictet, AFP Old Mutual, Amundi, and MetLife. 

Puzzling to me is why there aren’t more U.S. managers taking advantage of the time zone proximity and brand strength. 

Time for WarrenEnskat to organize something for 2016. Stay tuned. 

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Ley seca. 

Very interesting… Tomorrow are some local elections here in Colombia and so tonight the country is banned from drinking so they don’t show up drunk for the vote. 

Love it. 

  

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The Impact of US Growth and a Strong US Dollar on Emerging Markets

#thanksobama

US unemployment has dropped from 10% in late 2009 to 5.5% in February 2015, and the US Dollar is on a record growth streak.

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While that is good news for US firms and US investors looking to acquire ex-US, it exposes major weaknesses in emerging markets across Latin America and Asia.  On top of that, the Fed might decide to start raising interest rates should the US economy keep growing steadily.

Latin America might get hit even harder, given that the above pressures are on top of political instability and low domestic growth. Thus structural reforms are becoming more important. Certain parts of Asia, including India, have a leg up and are further along down the path of reforms and infrastructure investments (many of these countries also still have room to lower interest rates if necessary).

Probably now is the best time to act according to Warren Buffett’s motto: be greedy when others are fearful, especially for firms and investors that see EM as a core part of their investment portfolio and/or business.

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Fondos de Inversion Colectiva (FIC) Growth in Colombia

Colombia is on a communication and education campaign for mutual funds (fondos de inversion colectiva).

The industry is still small in comparison to North America or even Chile, but according to the Superintendencia Financiera de Colombia, AUM at 2014 year-end stood at $42 billion in some 129 funds.

Today, only 2% of Colombians invest in mutual funds, representing 6% of GDP.

The government’s initial goal is to move in the direction of Chile, Brazil and Mexico, where mutual funds represent a sizable part of GDP. Recent legislative changes and a greater focus on investor education and communication point towards product innovation and a focus on long-term savings via funds.

Much to do, but there are low-hanging fruit to be harvested for international fund firms.

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Finding Balance

Balance BASo Colombia

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Mutual Fund Assets at $31 Trillion – Equities Dominate, Global Retirement Solutions

Globally, mutual fund assets tracked by the ICI and other associations are above $31 trillion. Almost half of that total is in equity funds and almost 60% are held by investors in the Americas.

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Latin America accounts for about $1.5 trillion in AUM, Canada adds another $1 trillion, with the rest held in the U.S.  The growth rates for the latest few quarters have to be taken with a grain of salt due to the strong appreciation of the US dollar globally.

Still, retirement investing as a structural growth engine for mutual funds will likely propel AUM figures to over $50 trillion in the next five years.

As distributors and institutions are working more closely with selected large and boutique partners, product development and investment solution structuring will be the key to success, along with the right talent driving relationships and returns.

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