Prudential Buys Mexican Asset Manager
December 6, 1999
Prudential Insurance Company of Newark, N.J. has purchased a majority stake in the third-largest independent fund management company in Mexico. Prudential last week acquired a 51 percent interest in Apolo Operadora de Sociedades de Inversion of Mexico City. The new company will be named Prudential Apolo Operadora de Sociedades de Inversion. Both companies declined to disclose how much Prudential paid for Apolo Operadora.
In the next two years, Prudential Apolo will open a nationwide branch system with four locations in Mexico City and 25 locations throughout Mexico, according to Manuel Somoza, founder and general director of Apolo, interviewed by telephone from Mexico City. Prudential Apolo is projecting 100 percent growth in the market in the next year, he said. Somoza declined to comment on the size of the investment Prudential is making in the new company.
Somoza said Prudential is one of the first overseas companies to enter the Mexican retail market. SEI Investments of Oaks, Pa. has been in Mexico for about a year but has focused on high net worth customers, those with assets of $500,000 or more.
Prudential expects to prosper in the Mexican market by bringing its retail expertise and, eventually, a variety of new Prudential products.
Apolo is a two-year-old company with $87 million in assets under management and nearly 4,000 retail and institutional clients, said Somoza. The company currently offers six different funds - five fixed- income funds and one Mexican equities index fund.
The retail market for mutual funds in Mexico is relatively new. Until 1996, Mexican law only allowed banks and brokerage houses to distribute funds and those channels focused on the high-end market. Only in 1996 were asset management companies allowed to begin marketing funds, Somoza said.
In 1998, there was an estimated $11 billion of assets in Mexican mutual funds, according to Ben Phillips, a consultant with Cerulli Associates of Boston.
By entering the Mexican retail mutual fund market now, Prudential has a head start establishing its brand name in a new, wide-open market, Phillips said. The risk for Prudential lies in how far and how fast this market will grow, he said.
In order to develop the retail market, Prudential Apolo will focus a large part of its marketing efforts on investor education, Somoza said.
"Mexico's financial culture is poor and our big challenge is educating the Mexican market on how mutual funds work," he said. The company will continue to advertise its services on television, billboards and in specialty magazines, he said.
Prudential's risk also depends on the size of its investment in Apolo, according to Carl Guarino, managing director of global assets management for SEI Investments.
"Clearly the market has a ways to go," he said. "They are just coming out of a crisis."
Prudential officials said the acquisition is part of a long-term strategy to diversify internationally.
"Our entrance into the Mexican marketplace demonstrates our confidence and commitment to the Mexican community and economy," said Rodger Lawson, a Prudential vice president. "The country's future is bright and we value and recognize the significance of having a Mexican partner."