Latin America is high on the list of priorities for asset managers. Mostly, that includes expanding investment management in and for the region to build out product ranges and investment capabilities, but we also see a much stronger business push into the Americas, across all channels.

Or, as the Economist said in an editorial this week: “in the war for talent, the US can learn a lot from Chile“.

But more on the strategic discussion on how #LatAm and #Asia are showing the developed world how it’s done later.

This week Principal Financial Group, one of the largest US providers of retirement solutions, announced the acquisition of one of the handful of Chile’s AFPs, Cuprum, for $1.5 billion.

Cuprum will give Principal a retirement platform in Latin America’s most developed retirement market, adding some 600,000 mandatory pension investors and over $32 billion in AUM to its existing business south of the border. Cuprum products include mandatory employee-funded pension plans, voluntary pension products (APV), and other long-term savings products.

From hire through retire

Luis Valdes, CEO of Principal International, called it offering “customers in Chile an unmatched line-up of pension savings and retirement income solutions from hire through retire.” A goal almost from the day the firm entered Chile in 1995, “this was really the one part of the system we had not been able to penetrate”, according to CEO Zimpleman.

Principal now has made half a dozen strategic acquisitions in the last 24 months, in Brazil, Mexico, and Chile, to build out the increasing retirement business in the region, as well as other channels. In March 2012 , as discussed in earlier posts, the firm bought Claritas in Brazil to complement the partnership with Banco do Brasil. And in 2011, Principal acquired a Mexican Afore from HSBC.

– Brazil takes the lead: Net cash flows, M&A, Joint Ventures and Latin America Opportunities

For Principal, as for many other international fund managers, LatAm expansion is part of a focus on fast grow emerging markets in general to expand regionally and by channel, while diversifying risks.

Cuprum has a wide range of risk based and other products available and always been good a giving a simple message around basic investment strategies and ongoing education. Many international firms can learn from them in their latest annual report.

Chile pioneered the private pension system in Latin America in 1981, around the same time 401k was introduced in the United States (the Revenue Act of 1978 included a provision that became Internal Revenue Code (IRC) Sec. 401(k) (for which the plans are named), under which employees are not taxed on the portion of income they elect to receive as deferred compensation rather than as direct cash payments).

Since then, Chile has become the main attraction for many international fund firms trying to distribute global UCITS structures on an institutional basis. And indeed, tens of billions of dollars are allocated to primarily US and European fund managers by the AFPs, such as Franklin Templeton, JP Morgan, Aberdeen, Pimco, Investec, Fidelity and others. Witnessing this success, many others are creating five year plans to make a serious dent in the region.

– Latin America in Asset Management – Quantifying the Opportunities for the region

Fund managers, though, it seems, are not the only ones flocking to Chile and Latin America. America, as the Economist so eloquently out it this week, “for more than a decade has been choking off its supply of foreign talent, like a scuba diver squeezing his own breathing tube” (arguably not the smartest strategy).

Enter Start-Up Chile with an attempt to lure American entrepreneur visa rejects to its “Chilecon Valley”. Since 2010, some 500 firms have been founded by entrepreneurs from close to 40 countries. Chile clearly is not alone, following in the footsteps of northern neighbor Canada or the Switzerland of the East, Singapore, where visas are issued without much agony to attract talent.

In all, it seems that going forward the US will have an even harder time to proudly proclaim “We built it”.

Go hard or go home.

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(c) Enskat Associates 2012