Moody's has a stable outlook for the Latin American asset management industry in 2020, on the back of expected growth in assets under management, despite political risks and modest economic expansion in the region.
"Asset management in LatAm will continue to exhibit sound AUM growth, which along with steady management fees, will underpin credit worthiness in the region's asset managers," Jose Montano, a Moody's vice president and senior analyst, said in a statement.
Lower rates in Brazil will shift interest away from savings deposits and fixed income funds and into equity and multimarket funds, Moody's said. On the other hand, relatively high rates and inflation in Mexico will keep asset managers exposed to government securities.
Elsewhere, Colombia's asset management sector will continue to benefit from the country's solid economic growth, as opposed to Argentina's mutual fund industry, which will be impacted by a projected contraction in the country's economy, Moody's said.
The rating agency expects political risks to continue next year, especially for countries seeing changing policy regimes such as Mexico, Argentina, Peru and Bolivia. However, political volatility in Brazil is expected to be relatively modest and will not directly affect the asset management industry.
The region's asset management industry is expected to double to $5.3 trillion in 2025 from $2.4 trillion amid growth in the middle class and a climb in pension savings funds, the Financial Times reported, citing professional services company PwC. Pension portfolios in particular are expected to grow about 14.4% per year in the next six years, PwC said.
The sentiment is echoed by Moody's, noting that a growing middle class and a more formalized workforce will buoy bond and pension funds.