A giant advertisement is being pasted on to a billboard sign along one of Mexico City’s urban motorways. In bright red colours, the promotion offers to help change your life.
It is not a revolutionary diet on offer, or an invitation to a join a new religious sect. It is Banco Santander Mexicano’s short-term mutual fund, which is now available to all of the bank’s customers.
The bank’s decision to make mutual funds available to smaller clients could change the way people save in Mexico, analysts say. Until now, mutual funds have been open only to institutional investors and wealthy Mexicans with Ps 1 million ($109,000) or more to invest.
A client needs a minimum of Ps30,000 to open one of the new portfolios. Banco Santander Mexicano, a unit of Spain’s Banco Santander Central Hispano, is offering a return 3% higher than those of traditional savings accounts, which yield around 4.5%.
Investments in the new mutual fund have come in briskly so far. In the first three weeks the fund has been open, clients have put in Ps400 million in total, the bank says.
Mexico’s two other leading financial groups, BBVA Bancomer and Banacci-Accival, are considering following Santander’s lead into the lower income market, signalling a desire to tap further into the growing savings culture.
Slightly higher up the wealth curve, these two banks currently offer similar products to Santander. BBVA Bancomer sells a fund with a minimum investment of Ps50,000, and Banacci-Accival has an on-line fund with a starting outlay of Ps100,000.
The move by Mexico’s banks into broader-based asset management is being welcomed as good sense. Since 1994, a similar strategy in Brazil has increased market share for the major banks and made the sector more competitive.
But success in Mexico depends on running the funds on an ultra-efficient basis, analysts say. “To be able to sustain the high rates of interest over a long period of time, you have to find a way to pull the assets together, keep costs down and make it profitable,” says Jose Garcia Cantera of Salomon Smith Barney in New York.
“But the costs are there. In an emerging market, you are dealing with a less sophisticated client base than in the US or in Europe. You need to explain things clearly to people who are less confident of their financial system. Yet you cannot offer them a personalized service. It is a big challenge,” says Garcia Cantera.
Adrian Aguirre, commercial director of asset management at BBVA Bancomer, says that investment in mutual funds is not an easy concept to digest for lower-income clients. “You have to take your time with potential investors,” he says. They don’t always understand they will be investing in financial markets rather than in the banking system.”
There is still the question of whether less-well-off Mexicans feel they have the money to invest in equities.
Miguel, an office worker in Mexico City who earns Ps10,000 a month, says he is interested in investing in a Santander mutual fund. But being the sole breadwinner in a family of five leaves him with little room to put money aside. “It is still just a little out of my reach,” he says.
