IIFA 2016 Annual Conference Osaka, Japan

Transcription

1 1. Economic and Financial Background During the fourth quarter of 215, the Board of the Central Bank estimated that in order to reach the target inflation it is necessary to increase the Monetary Policy Rate (MPR) to 3.5%, accumulating an increase of 5 basis points since October 215 (Graph N 1). Annual Consumer Price Index (CPI) inflation has currently decreased at 3.4% as of August, and it returned to the tolerance range (2-4%). Decreasing inflation is mainly explained by the appreciation of peso in recent months (Graph N 2). Graph N 1 MPR (percent) Jul. 215 Jul. 216 Jul. Source: Central Bank of Chile. Graph N 2 Consumer Price Indicator and Observed Exchange Rate (annual change, percent) Jul. 215 Jul. 216 Jul. CPI OER (right axis) Source: National Statistics Institute (INE)

2 In the second quarter of 216, the Gross Domestic Product (GDP) growth was the lowest since 215 (1.5% annually). The natural resource-related sectors showed less favorable performance (Table N 1). Consumption remained a limited growth (Graph N 3) while investment showed a positive increase, associated with specific imports of machinery and equipment. However, in the second quarter, investment in construction and other works had a higher than expected decrease in line with the real estate sector weakness. Also, the business and consumers expectations are still in the pessimistic territory (Graph N 4). Table N 1 Gross Domestic Product (real annual change, percent) I II III IV I II Agriculture, livestock and forestry Fishery Mining Manufacturing Electricity, gas and water Construction Trade Restaurants and hotels Transport Communications Financial services Business services Residential property Personal services Public administration GDP Source: Central Bank of Chile. Graph N 3 Consumption (annual change, percent) Mar. 213 Mar. 214 Mar. 215 Mar. 216 Private consumption GDP Source: Central Bank of Chile. 2

3 Graph N 4 Expectation of businesses and consumers (1) (original series) Jan.215 May. 215 Sep. 215 Jan. 216 May. 216 Consumer economic expectations (2) Business confidence excluding mining (3) (1) A value over (under) 5 indicates optimism (pessimism). (2) Consumer economic expectations. (3) Business confidence. Sources: Adimark and Icare/Universidad Adolfo Ibañez. The labor market has deteriorated. Nevertheless, the unemployment rate has adjusted more gradually due to increase in self-employment. Thus, this rate is 7.1% in the moving quarter ending in July (6.6% as of July 215) (Graph N 5 and N 6). Graph N 5 Unemployment rate (percent) Mar. 21 Mar. 212 Mar. 214 Mar. 216 Source: National Statistics Institute (INE). 3

4 Graph N 6 Job creation by occupational category (annual change, percent) Mar. 21 Mar. 212 Mar. 214 Mar. 216 Wage jobs Self-employment (right axis) Source: National Statistics Institute (INE). 2. Funds Under Management and Portfolios 2.1 Mutual funds industry By June 216, the assets under management (AUM) reached USD 45,816 million (Graph N 7). This meant an annual growth rate of 5.2% in local currency. However, this does not include the depreciation of the peso. In mid-216 the industry represented 18.8% of annual GDP (Graph N 8). Graph N 7 Mutual Funds (index December 213=1) December 213 December 214 December 215 4

5 Graph N 8 Mutual Funds (percentage of GDP) (*) (*) It Includes data through June 216. and Central Bank of Chile. AUM in Chile has always been concentrated in debt funds (Graph N 9). Money market funds captured most of the assets managed in the industry (Table N 2). Nevertheless, in recent years, the low interest rates and international risks are factors that have compressed returns on Money market funds. Therefore, long-term debt funds have increased their AUM (Table N 3). Graph N 9 AUM by Fund Type (US $ million) 24, 18, , 4 6, 2 Money Bond Balanced Equity Qualified Investor Market June 215 June 216 Structured 5

6 Table N 2 AUM by Fund Type AUM Share of Total Annual change YTD (US$ million) (percentage) (percent) (percent) Jun. 15 Jun.16 Jun. 15 Jun.16 Jun. 16 Jun.16 Money Market 2,53 2, Bond 18,114 18, Balanced 3,653 3, Equity 4,97 2, Structured Qualified Investor (1) Others (2) N/A N/A Total 47,81 45, (1) 35.1% of the Qualified Investor Funds to June 215 ended operations during the year. (2) It corresponds to funds not rated or have been recently created or that have changed their effective investment policy during the period of comparison. Table N 3 Share of Total (percentage) June 213 June 214 June 215 June 216 Short term Money Market Long term Total Debt By mid-year, number of investors was around 2 million (Table N 4). Investment preference has changed as noted in the above table and in Graph N 1. Table N 4 Investors by Fund Type Investors Share of Total Annual change YTD (thousands) (percentage) (percent) (percent) Jun. 15 Jun.16 Jun. 15 Jun.16 Jun. 16 Jun.16 Money Market Bond Balanced Equity Structured Qualified Investor (1) Others (2) N/A N/A Total 2,8 2, (1) 35.1% of the Qualified Investor Funds to June 215 ended operations during the year. (2) It corresponds to funds not rated or have been recently created or that have changed their effective investment policy during the period of comparison. 6

7 Graph N 1 Investors by Fund Type (thousands) 1, Bond Money Market Equity Balanced June 215 June 216 Structured Qualified Investor 2.2 APV Market (non-mandatory pension savings) As of June this year, the AUM of APV in the mutual funds industry, reached USD 2,736 million 1 (Graph N 11). The market share was 32%, keeping the second place of the market (Graph N 12). In terms of evolution, the AUM expressed in dollars increased 1% annually (9.2% in local currency). In 216, number of investors was around 26, representing an increase of 3 annually%. Graph N 11 APV (US $ million; thousands) 3, 2,5 2, 1,5 1, AUM Investors (right axis) It corresponds to 6% of the total managed by the mutual fund industry. 7

8 Graph N 12 Market share in APV industry (percentage) Investment (*) Life Assurance Companies, Housing Funds, Banks y Stockbrokers. Sources: Chilean Mutual Funds Association (AAFM), Superintendency of Banks and Financial Institutions of Chile (SBIF), Superintendency of Pension Funds of Chile (SP) and Superintendency of Securities and Insurance of Chile (SVS). In June 216 investments in domestic instruments represented 9.9% (87.9% in 215). Resources were mainly invested in deposits, as well as in banks and financial institution bonds (Table N 5). Meanwhile, foreign investment represented 9.1% (12.1% in June 215) and was mainly concentrated in ETF and mutual funds (Table N 6). Table N 5 Domestic investment (US$ million) I.215 II.215 III.215 IV.215 I.216 II.216 Private Pension Funds (AFP) Mutual Funds Others (*) June 215 June 216 Deposits 24,141 24,346 Banks and financial institution bonds 7,41 8,798 Corporate bonds 2,41 2,43 Central Bank of Chile Bonds 1,716 1,829 Goverment Bonds 1,67 1,947 S.A Shares 1, Central Bank of Chile commercial papers Mutual funds Banks and financial mortgage notes Corporate commercial papers Secured bonds Mortgage bonds Investment funds 5 26 Others (*) 4 5 Total 39,873 41,581 (*) Contract on products consisting invoice (Law N 19,22). Sources: AAFM and Superintendency of Securities and Insurance of Chile (SVS). 8

9 Table N 6 Foreign investment (US$ million) Total 5,51 4,174 Sources: AAFM and Superintendency of Securities and Insurance of Chile (SVS). 92.9% of foreign instruments were issued in the United States, Luxembourg, Ireland, Brazil, Mexico, Peru and Colombia. It points out that, while the percentage of foreign investment issued in Brazil decreased, in Peru and Colombia it increased relative to the previous year (Table N 7). Table N 7 Issuing countries concentration investments abroad (percentage of total) June 215 June 216 ETF 2,54 1,646 Mutual funds 1,88 1,632 Goverment and Central Bank Bonds S.A Shares Corporate bonds Banks and financial institutions bonds Corporate commercial papers 63 1 ADR Structured note equity Investment funds 8 9 Banks and financial institutions deposists and commercial papers 3 61 Other equity instrument 1 June 215 June 216 United States Luxemburg Ireland Brazil Mexico Peru Colombia.9 1. Others (*) (*) In June 216, these countries account for less than 1% of the total. Sources: AAFM and Superintendency of Securities and Insurance of Chile (SVS). 9

10 3. Key trends in flows and assets under management 3.1 Education and information efforts of the Industry The Chilean Mutual Funds Association (AAFM) has been organized several financial literacy activities, such as: Educational campaigns in schools: During 215 and 216, the AAFM has developed a financial education program called A Fondo en mi futuro ( Deep into my future ), which has been successfully implemented in schools, teaching children and youngsters the importance of saving early and responsibly. Educational campaigns in universities: AAFM, Universia (a network that consists of 1, universities over 15 countries), and other trade associations launched a program in 214, which aims to provide information and basic tools for students to better address the labor market. Additionally, the general managers of the entities associated to the AAFM visit universities to present in a simple and friendly manner the importance of financial planning and the basics of operating mutual funds. Increasing use of digital media: Since 214, the AAFM has had in place Facebook and Twitter sites AFondochile and FondosmutuosCL, respectively. These networks have succeeded in creating and involving a responsive community to the content offered. Additionally, the AAFM has a page about financial education: This site explains, using a simple and clear language, various fundamental aspects associated with investing or saving through mutual funds. Journalist education: Through media, the AAFM can inform and educate people effectively. So, encouraging thorough, impartial and correct business journalism is highly relevant. In order to jointly analyze various topics related to the industry, and resolve queries or concerns about this, the Association continues to hold meetings with journalists, coordinators and editors from different media. Economic and Financial Journalism Award in Chile (PEF): For the third consecutive year, the Association organized the PEF award. This award recognizes excellence, thoroughness and quality of journalistic work in the financial sector specifically in matters relating to savings and the mutual funds industry investment. Financial Literacy Fair: In October 215, the AAFM participated in the third version of the Financial Literacy Fair organized by the Superintendency of Banks and Financial Institutions (SBIF), which is aimed at children up to 13 years. 4. Product developments No news regarding product developments. 5. Regulatory and self-regulatory developments 5.1 Regulatory Framework The AAFM's efforts in 215 and 216 were focused on ensuring the implementation of a number of laws and regulations within a simplified and flexible legal framework that takes the industry's vision and potential into account. This work was undertaken with a view to strengthen the industry's growth and development, and to open opportunities for both private and public participation and discussion. 1

11 To achieve these ends, the AAFM was an active participant in the processes associated with the implementation of, and amendments to, Laws No (Ley Única de Fondos) and No on Tax Reform (TR): Law No , regarding the administration of third party funds and individual portfolios or the Unitary Funds Law (LUF for its acronym in Spanish): Following its implementation in 214, and throughout 215 and part of 216, a number of concerns regarding the implementation of the LUF were presented. Article 57 bis: The Tax Reform Law amends the system for the taxation of income, and introduces various adjustments to the tax system. The elimination of the benefit provided for in Article 57 bis had a significant impact on the industry as it had been a savings incentive regime that was widely employed by clients. It is estimated that more than 3, prior beneficiaries have since faced increases to their taxable income. The industry regrets the repeal of this benefit, particularly in view of the fact that the reasons for it are unknown. The benefit had been working well to the advantage of a number of financial products whose objective was to reward long-term savings by individual investors. The AAFM will continue conversations with authorities to try and restore the benefit through a miscellaneous law. Norma Carácter General (General Rule) No. 412 which establishes the manner, timing and requirements to be met for the purpose of certifying knowledge: On September 6, 216 the SVS (Superintendency of Securities and Insurance) issued rules for certifying the knowledge of intermediaries, third-party resource managers and quota marketing agents. The aim here is to establish the basis for the accreditation of directors, managers, operators, consultants and executives regarding knowledge of the following topics: (i) existing legal framework, (ii) risk management conceptual framework, (iii) basic financial and economic concepts and (iv) specific knowledge for each job title. The legislation provides a simplified accreditation process for those persons who are exclusively engaged in receiving buying and selling instructions for financial instruments and who do not make investment recommendations. Goes into effect in July Self-regulator AAFM Self-Regulation Council: The Council focused its efforts on ensuring compliance with the resolutions adopted by the industry. 6. Corporate governance - major developments No news for the industry regarding corporate governance, except for the fact that is a matter of great dedication by all associates. 7. Fund governance The mutual fund industry created a fund categorization in 27 through the Association, in order to provide valid comparisons between mutual funds. The classification of funds is based on their effective investment strategy assuring that those compared funds have similar investment policies Table Nº8 shows the current categories. 11

12 Table N 8 Categories According to Effective Investment Strategy Category Equity Funds Balanced Funds Money Market Bond Funds< 365 days Bond Funds >365 days Closed end Funds Qualify Investors Funds Others Funds (*) Subcategory Latin America Emerging Asia Asia Pacific Brasil Developed United States Emerging Developed Europe Emerging Europe National Large CAP National Small & Mid CAP Country MILA countries Sectorial Agressive Conservative Moderate International US Dollar International Euros National International National Flexible Origin International, Investment in Emerging Markets International, Investment in International Markets National, Investment in Pesos National, Currency-indexed Invest<= 3 years National, Currency-indexed Invest>3 years Flexible Origin Developed Equity Emerging Equity Debt Local Equity Foreign Equity Debt Others (*) It corresponds to funds that have not been rated or that have been recently created or that have changed their effective investment policy during the period of comparison. 12

13 In late 215, limits that regulated Balanced Mutual Funds investment were modified and the following modifications were introduced: Table N 9 Investment limits Balanced Mutual Funds (percentage) Category Debt instruments Agressive Balanced 1 to 35 1 to 4 65 to 9 6 to 9 Conservative Balanced 65 to 9 6 to 9 1 to 35 1 to 4 Moderate Balanced 35 to 65 4 to 6 35 to 65 4 to 6 8. Other major issues and developments Equity instruments OECD agreement on the multilateral exchange of financial information: During June 215, the Minister of Finance approved adoption of the OECD's agreement for multilateral exchange of financial information, effective September 218. In a manner similar to FATCA, this agreement between adopting countries will give tax authorities access to its citizens' financial and/or tax information in an effort to establish an international standard for the regulation of tax evasion. The AAFM, in conjunction with the Ministry of Finance and other groups, is working on the text for implementation of the initial stage regulations related to Due Diligence, slated to go into effect in January of 217. XI Pacific Alliance Summit: The XIth Pacific Alliance Summit, with participation by Chile, Colombia, Mexico and Peru, took place in the Chilean city of Puerto Varas, located in the country's Lakes Region. The AAFM was present at the event and, as previously done with the MILA, again put forth the initiative for the regionalization of funds. FIAFIN: In January 216, the constitution of the Iberoamerican Federation of Investment Funds in Chile (FIAFIN for its acronym in Spanish) was formalized. The annual meeting, held on 1 June in the city of Buenos Aires, named the Board of Directors for the June June 218 term, and included the nomination of M. Cavallini as Vice President. 13