Foreign investment into Latin America is poised to accelerate, but market structure issues must be solved to unlock flows. A new report from Nasdaq and The ValueExchange explores the opportunities (and expectations) for improving post-trade processes and standards.
The top takeaway from our survey is that 84% of respondents want to grow their Latin American exposures – but 59% experience market inefficiencies that block or limit their investments.
The prime culprit? Regional variance. From settlements to securities lending, collateral management and proxy voting, post-trade inefficiency and fragmentation is holding back investment.
The solution? Regional consolidation or harmonization that lifts these roadblocks and lays the groundwork for the efficient operating model of tomorrow.
We spoke to more than 100 buy-side firms across North America, Europe/Middle East/Africa and Asia-Pacific on their volumes, blockers and growth plans.
Foreign investment flows are expected to grow 16% on average into the region over the next two years.
Share of investors with more than $1 billion set to expand LatAm exposures.
Share of investors active in Argentina who cited attractive investment returns as their primary driver.
Share of North American-based investors who cited passive investments as their primary driver for regional investments.
Share of investors active in Brazil who cited investment diversification benefits as their primary driver.
Despite the current issues, respondents saw tangible upside from the standardization of processes across the post-trade spectrum, whether achieved through regional consolidation or harmonization: 11% cost savings were expected on average. The potential for savings as a result of regionalization was seen across a variety of post-trade functions; for example, 35% of investors expect cost savings of 11% - 20% in securities lending, while 23% of investors expect cost savings of 11% - 20% in settlements. Ultimately, however, the region will need to balance the divergent challenges and expectations of wealth and institutional investors, the former of which prefers harmonization compared to consolidation preferred by the latter.
Respondents ranked market infrastructure changes as the most impactful driver in establishing a modern and future-proofed operating model
Respondents ranked market infrastructure changes as the most impactful driver in establishing a modern and future-proofed operating model
Respondents saw wide potential for P&L improvement, including 81% who believe standardized messaging in collateral management could deliver up to 21% improvement.
Respondents saw wide potential for P&L improvement, including 81% who believe standardized messaging in collateral management could deliver up to 21% improvement.
Solving today’s challenges could put LatAm markets in position to capitalize on new opportunities in tokenized digital assets (13% average growth) or voluntary carbon credits (9% average growth).
Solving today’s challenges could put LatAm markets in position to capitalize on new opportunities in tokenized digital assets (13% average growth) or voluntary carbon credits (9% average growth).
Nasdaq and The ValueExchange partnered to understand why global investors are drawn to Latin America and how markets can lift blockers to capital flows.
Please check your inbox for your copy of the VX LatAm survey report.
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