Sura Asset Management Sees Lethargic Markets Making a Comeback

(Bloomberg) -- One of Latin America's biggest asset managers expects two of the most lethargic markets of 2017 to shine this year.

"We're seeing a very good start for domestic demand in the region, especially in Chile and Colombia," Ignacio Calle, chief executive officer of Medellin-based Sura Asset Management SA, said in a phone interview.

Sura Asset Management stands to gain from the economic recoveries in these countries as higher growth should attract more retail and institutional investors to its funds, Calle said. Still, 2018 shouldn't be as stellar for the firm as 2017 was: Assets under management for Sura rose 14 percent last year to $135 billion, according to the company.

This year, Colombia and Chile should see growth of 2.5 percent and 2.7 percent, respectively, according to data compiled by Bloomberg. Colombia grew 1.8 percent in 2017, and while final figures for Chile haven't come out yet, the country is estimated to have grown 1.5 percent.

The two parts of its business that should see the biggest growth are wealth and asset management, Calle said. Those two divisions each posted 27 percent higher revenue last year.

The firm plans to invest about $50 million this year in new technology, robotics and artificial intelligence as well as organic expansion, Calle said. Acquisitions aren't being considered in the short-term as Sura already has a dominant position in many of the markets in which it operates, he said.

Sura Asset Management doesn't operate in Brazil and doesn't have a direct presence in Argentina, though its controller, insurer Grupo de Inversiones Suramericana SA, does. Calle said that the firm may get a license to operate there, but solely to provide asset management services to Grupo Sura's treasury in that country.

Sura Asset Management, created in 2011 when Grupo Sura agreed to buy the local operations of ING Groep for $3.6 billion, saw operating profit grow 17 percent in local currency last year, while its net income remained stable at about $209 million.

Retirement Reforms

Sura Asset Management is the biggest operator of individual savings accounts for pensions in Latin America, a sector that has seen political turmoil. In Chile, protesters have taken to the streets to demand higher pensions and a return to a state-controlled pay-as-you-go system. Former President Michelle Bachelet promised to reform the system last year; Congress still has to vote on the draft.

Calle agrees that the system requires reforms, not only in Chile, but also in Colombia and Mexico, where Sura also operates private pension savings.

"There have to be adjustments upwards in Mexico in the savings rates, currently at 6.5 percent of gross salaries, while in Chile they're talking about increasing to 14 percent," Calle said. "It's very important for Mexicans to increase their savings rate. That reform is essential."

--With assistance from Javiera Quiroga

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Christiana Sciaudone, Morwenna Coniam

©2018 Bloomberg L.P.