The investment world is defined by nuances that reflect local preferences, regulations, and the cultural characteristics of each region. Latin America is no exception, and operating in a market with such specific idiosyncrasies often means that clients of asset managers see the coordination between Iberia and Latam as an added value.
This brings significant advantages, as it allows for high-quality service with a strategic focus in the various countries where operations take place. Moreover, we hold a competitive edge over our European neighbors: a common language and a cultural connection that enable us to provide tailored service to meet each client’s needs.
However, when comparing the investment dynamics between Latin America and Iberia, clear differences emerge in both the nature of investors and the regulatory frameworks governing the markets.
Retail Preferences in Mexico, Brazil, and Beyond
In Mexico and Brazil, retail investors—including banks, independent advisors, and platforms—tend to favor local products with a conservative focus. In contrast, elsewhere in the region, as well as in Iberia, such investors predominantly opt for UCITs-compliant funds and ETFs.
Institutional Strength in Latin America
In the institutional segment, which includes insurers, pension plans, and family offices, Latin America stands out as one of the most advanced regions in the world. A prime example is the pension plans in countries like Chile and Mexico, where mandatory worker contributions have created a robust and sophisticated institutional ecosystem. In this ecosystem, pension funds play a fundamental role in asset management.
Regulation and Distribution: A Study in Contrasts
Regarding distribution, Latin America is characterized by the autonomy of its markets. Each country has its own regulations defining how financial products are distributed among investors. This heterogeneity contrasts with the uniformity in Spain and Portugal, where MiFID regulations unify financial market oversight across the European Union. While this facilitates cross-border operations, it may limit the personalization offered by the fragmented markets of Latin America.
Investment Preferences: Diverging Trends
Investor preferences, whether retail or institutional, also reflect these structural differences:
In US Offshore and South America, excluding Brazil, a significant portion of portfolios is allocated to U.S. assets, including fixed income, equities, mixed assets, and alternatives. There is also growing interest in diversifying beyond traditional funds into vehicles like ETFs or separately managed accounts (SMAs).
In Mexico and Brazil, the focus remains on local fixed income, supported by high interest rates, making this asset class a cornerstone of their portfolios.
Iberia’s Changing Landscape
In Iberia, the recent shift in European Central Bank monetary policy has influenced investor behavior. Investors are moving away from money market funds toward options offering greater added value, particularly in European fixed income, which now presents better prospects due to interest rate adjustments and inflation stabilization.
In equities, there is a trend toward diversification to reduce dependence on national indices often dominated by a few large companies. This strategy aims to mitigate risks associated with high concentration and improve returns by targeting sectors or regions less represented in traditional indices.
Investors are increasingly exploring active management strategies that prioritize companies with quality and value profiles. Simultaneously, thematic investments—such as technological transformation driven by digitalization and AI, or energy transition—are gaining traction. Additionally, emerging markets like India, often underrepresented in traditional portfolios, have captured the interest of Iberian investors due to their significant potential.
Shared Pathways and Future Opportunities
Despite their differences, Latin America and Iberia share a common path in fund management, as both regions lean toward products offering risk diversification and new sources of profitability. A shared vision can provide fertile ground for innovative investment strategies, supported by the commitment of global asset managers with strong local components. This approach enables the advancement of each country’s strategic plans.
Adapting to the specific characteristics of each market is crucial. Only in this way can asset managers in Spain deliver tailor-made services suited to the needs of clients on both sides of the Atlantic.
Authored by Javier Villegas, Head of Iberia & Latam at Franklin Templeton.
