Mexico's mutual fund industry could emerge from the current crisis virtually unscathed as tight regulations prevent it from investing significantly in variable income and riskier instruments, Ernesto Reyes Retana, technical director of committees at the Mexican association of stockbrokers (Amib), told BNamericas.
The fund industry in Mexico has a high concentration of investments in debt instruments and 75% of portfolios are invested in government bonds.
At the close of September this year, debt instrument investment funds represented 86% of the Mexican industry, while equity funds made up the remaining 14%.
In Mexico, the law only allows operations that have been previously defined in regulations, which has allowed the market to face the crisis better as there are no significant investments in derivatives, hedge funds or other more complex products, Reyes said.
From December 2003-September this year, funds in Mexico grew significantly: clients have increased 204% to some 2mn, net assets grew 154% and the number of fund managers grew 33.2% - surpassing the 500 mark - all of this in stable conditions.
"If an atmosphere of confidence and certainty can be maintained, the impact of the crisis could be less and our expectations favorable, leading to hope investment companies will have a better chance of emerging unscathed from the financial crisis," Reyes said.
Mexican regulation has been making the necessary reforms for years, which has allowed for gradual development in the industry. This, together with the country's economic stability over the last decade, has allowed for strong industry growth.
At the close of June, assets managed by Mexican fund managers totaled 955bn pesos (US$93bn), up 9.2% in real terms compared to the same date last year, according to the latest data available by regulator CNBV.
"It is still not possible to give a full picture of the effect of the crisis in the fund industry without considering all the aspects that influence it such as volatility, interest rates and consumer confidence, Reyes said.
In the Mexican fund industry, there is a diversity that can adjust to the needs of the client, taking into account its aversion to risk and the level of liquidity it requires.
This means the number of clients and assets associated with equity funds could decrease, while debt funds investing in government papers - and bonds with shorter terms - may increase significantly, the executive said.
"We do not rule out the possibility equity funds may grow at a lower rate if their portfolios include issuers with low levels of leverage and stable cash flows," he added.
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