BlackRock's Senra sees opportunities in Latin America's emerging wealth industry
March 27, 2019
Regional markets are more mature, but the wealth industry remains in its infancy, says the head of BlackRock's Latin American business
With almost $6 trillion in assets under management, far more than the GDP of many countries, BlackRock is the world’s largest money manager. Founded in 1988 with headquarters in New York City, the investment management firm has exposure in almost every region. Overseeing $138 billion in assets in Latin America is Armando Senra. Here he talks about how the region’s capital markets have evolved and what to expect in the future.
Latin American capital markets have matured dramatically in recent decades. How would you assess those markets today when it comes to stability, liquidity and regulation?
Talking about Latin America that broadly won’t work. When I look at the key markets where we participate — Chile, Peru, Colombia, Mexico, Brazi — we’ve come a long way in the last 30 years. You have a deepening of the markets, more sophisticated markets in terms of the development of products, whether its derivatives, ETFs coming to the market, private equity. Other alternative strategies like the creation of vehicles that invest in real assets have transformed places like Mexico. You see a stronger regulatory framework with better corporate governance in those markets. There’s the rise of ESG (environmental, social and governance guidelines), still in the early days. We’re beginning to see that trend faster than we anticipated but still in the early days.
Clearly, as a global investor, when we’re looking at emerging markets, we’re thinking about liquidity, but also thinking about stability and the rules of the game. In emerging markets overall, you have less liquidity than developed markets and that means a lot of times the investments you make will have to be longer-term investments. You cannot get out that easy so we need to continue to see macroeconomic stability, policies that drive a strong regulation in capital markets — rules that don’t change. And that’s generally the path that these key markets have followed and, hopefully, a path that the rest of markets in Latin America will follow as well.
Are any Latin American countries standouts when it comes to regulatory reform?
You can go back a long time ago to the example of Chile and the opening of the pension plans that allowed them to invest abroad. Politically, there may have been challenges, but it allowed pension plans to get better outcomes for their clients, the pensioners, and have more diversified portfolios. It also reduced the pressure on the local market from all that money just being invested locally.
How have sovereign wealth funds helped the markets mature?
Sovereign wealth funds have played an important role in bringing the best global standards in terms of transparency, investment process, including ESG guidelines. They bring regulatory values to the market that permeate other areas, whether it’s pension regulation or the wealth segments. That’s a huge benefit. I would be more cautious about their active role in local markets given that there is conflict of interest in having governments be an active investor in local markets. But in terms of bringing best practices to the markets, they have played a very important role.
Where do you see BlackRock’s business heading in Latin America in the years to come?
We’ve had tremendous growth as you would expect in the pension segment. But you have an asset management industry that’s still in its infancy in many ways. The one segment that is still very much in the early stages is the wealth segment. I like to call it wealth because it covers different layers. Some people call it retail. But it’s one of the areas where Latin America is still in the early days and has a long way to go to incentivize wealth investors to invest and not just to save in deposits but to create a vibrant retail business across the region.
So the rise of the middle class in Latin America is an opportunity to expand your business?
From a pure macro perspective, we always liked Latin America because of the rise of the middle class. But you’re going to have to create new products for them to invest in so they can achieve their goals. This is where the definition of wealth varies a lot from someone who is just beginning their professional career and is saving for retirement, someone who is saving for college, someone from a very wealthy family who needs to diversify their portfolio. It will play out differently depending on the segment.