There’s broad consensus in the Andes that the region’s pension systems need to be updated to improve payouts for retirees, as well as include others who did not contribute to the system during their working years, but political movement to achieve these goals has stalled. While this is good news for external managers, significant challenges—attractive yields on local, onshore fixed-income securities and the uncertainty surrounding the future of the AFP business—continue to exist.

Managers seeking to gather assets in the USD991 billion Latin American pension market consisting of Peru, Chile, and Colombia as well as Mexico and Brazil should capitalize on pension-fund appetite for long-term, low-volatility products with a product lineup that consists of private equity or other alternatives. Demand for such investments is well under way, with Peruvian and Mexican private-pension managers allocating a larger percentage of their portfolios to alternatives than to cross-border mutual funds and exchange-traded funds (ETFs).

In addition to offering in-depth coverage of Andean pension reform and allocation changes, our latest report, Latin American Distribution Dynamics: Latin America's Leftward Tilt and Its Impact on Retail and Institutional Asset Gathering, provides comprehensive analysis of six Latin American countries with the largest addressable asset management markets, focusing on retail and institutional product demand and opportunities for asset managers.