In a new series, Funds Europe in conjunction with Investec Asset Management, looks at the challenges affecting fund distributors around the world. Jean Pierre Serani Toro, chief executive officer of Valores Bancolombia, explains the opportunities he sees in asset management.
What lessons have you learned in the last five years?
We combine investment banking, broker dealer, asset management and private banking activities and the lessons learned are all somehow related to the importance of transparency when it comes to doing business.
Prioritising the interests of the client is also our main driver. We have used this strategy and it has produced great results. Client satisfaction, market share and income are variables we have seen rising consistently.
With regard to asset management, during the last five years we have seen important growth in both assets under management (AUM) and the number of clients within the local mutual fund industry. Today in Colombia, mutual funds manage more than US$25 billion (€19.8 billion) for over one million investors.
Although AUM has been steadily growing at a compound annual growth rate of more than 10% for the last 10 years, representing close to 10% of the country´s GDP, there is substantial growth potential compared to other Latin American countries, like Mexico, Brazil, and Chile, where mutual funds´ AUM represents 20 to 40% of GDP.
The biggest lesson we have learned is that we have to constantly improve our asset management capabilities so that we continue to respond to this ongoing trend with great service and outstanding products.
What are the biggest challenges facing your business?
Contributing to the development of Latin America´s integrated market (Mila) is one of them. Risk management in a volatile and uncertain market environment is a big one too. Facing regulation and capital requirements are also significant issues for Andean broker dealers like us.
Due to the industry´s growth potential, and recent regulation that creates a transparent framework for managing, administrating, and distributing mutual funds, we will experience increasing competition from local, regional and international managers. Independent local managers will continue to merge within themselves, or with larger financial groups with stronger distribution channels.
Some regional players have also entered the market through acquisition of smaller independent managers, and will keep strengthening those relationships in the coming years. Large international managers are seeking distribution or co-management alliances with local and regional managers in order to get a slice of the market.
Where do you see the greatest opportunities?
We see great opportunities in asset management. The need for creating value for clients and shareholders makes us look to this market in a special way. The margins in transactional business and trading are under pressure, so generating revenues should come from asset management and also from underwriting of primary offerings.
The appetite for Colombia from foreigner investors is also an area we will focus on, as we can take advantage of the leading position of the firm and Bancolombia, as our parent company with capabilities in products and services for institutional investors.
From a distribution and client perspective, we see enormous potential in offering retail, private banking, corporate and institutional clients access to saving and investing in capital markets through our complete range of asset management solutions.
How do you see your business model changing as a result of new business pressures?
The business model should migrate from low added value activities to activities producing consistent revenues and profits. Migrating individual investments to collective vehicles as funds, and providing platforms and tools for low-end clients so they can trade on their own, is part of our business model.
We also value the education and training of our sales team, specialists and portfolio managers, and aim to offer the greatest talent in providing services to institutional, corporate and private banking clients.
In asset management, we expect to complement our existing product range with new products that have an emphasis on alpha generation. We also expect to continue to improve our client experience by delivering outstanding advisory services through multiple channels; including the call centre, account managers, mobile phone applications, the Internet, eTrading and Bancolombia´s branches.
What are the greatest influences on your business?
Influences come from various sources. The need to be there for the clients 24/7 has made us invest in electronic negotiation platforms so that they can trade and move their money within products on their own.
Another influence is the clients expecting to be more informed and better advised, which has led us to invest in reinforcing research and specialist teams, as well as training for our sales force.
How do you feel you make a difference for your clients?
As previously discussed, by applying transparency to every business decision and working for the client’s interest in the first place. This makes up part of the DNA of Grupo Bancolombia. Building both long lasting and profitable relationships helps us to stand out from our competitors.
Looking five years ahead how do you see the industry?
Within five years the local industry will be dominated by financial institutions with large capital. Small businesses will be niche players, but big institutions will provide a whole range of products and services for several markets on a ‘one-stop shop’ basis.
We anticipate big progress in our market as the independent custodian and central counterparty clearing developments allow for risk management.
We also expect the standardized futures market to grow, which will bring even more sophisticated products and strategies for the asset management industry…
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