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Moody's: Argentine fund managers play safe to buoy AUM growth

Argentine asset managers are moving toward more conservative strategies, with a focus on liquidity and foreign investments, as financial conditions in the country continue to be unfavorable ahead of presidential elections, Moody's said in an Aug. 1 report.

The country's fund industry suffered huge losses as the exchange rate crisis last year struck peso-denominated short-term securities, which had yields of up to 30% at the time, according to Moody's. As a result, asset managers have looked into funds with lower risk profiles, although some had more success than others, the rating agency noted.

In particular, independent asset managers have eclipsed bank-owned managers when it comes to broadening their AUM portfolios. Independent managers released new products like Latin America-specific funds or reduced their portfolio durations, whereas bank asset managers fell behind with late releases and old strategies, Moody's said.

AUM among independent managers have expanded 40% through June, while banking AUM levels have not yet recovered since April 2018, the rating agency said.

Latin American securities, excluding Argentina and high-yielding money market funds, emerged as the favored funds among successful asset managers, especially given uncertainty brought by the impending presidential elections, Moody's said. These Latin America-specific vehicles are made up of Chilean and Brazilian sovereign bonds, which have low volatility and hard-currency returns.

Although having full exchange rate risks, local currency money market funds are popular due to their markedly high interest rates, which could reach up to 60%, Moody's said.

Aggregate AUM in Argentina rose 22% by June from its lowest point in October 2018, the rating agency noted.