TBY talks to Stella Villegas De Osorio, President of the Asociación de Fiduciarias de Colombia, on the strengths of the trust fund mechanism, its contribution to the economy, and why the sector is growing.

How has the trust sector evolved in Colombia over the past few years?

Since the Association was established, the sector's growth has been exponential. By June 2013, the sector managed assets worth Ps250 billion, representing 37% of GDP. The Financial Superintendency of Colombia (SFC) grants two types of licenses to the trust sector: trust management licenses and collective investment fund licenses. The 27 trust companies currently operating in Colombia manage 126 types of funds amounting to Ps30 billion. In terms of regulation, Colombia has made important advances in different areas. In the last few years, changes in the tax framework and the strict control over the sector by the SFC have enabled the sector to strengthen. Moreover, in June 2013, the government introduced a new regulatory framework, adjusting the collective investment funds industry to international standards, which allowed this instrument of collective savings to become even more global. Regarding the trust business, this builds confidence for customers and the authorities, as well as security for investors, turning the trust instrument into one of the most attractive tools for the development of different projects, particularly real estate and infrastructure.

In your opinion, how does society see the trust sector and its companies?

The financial performance of the trust sector has been significant in recent years, which means that there is a good insight into this industry. However, we must continue to work in order to provide a wider knowledge on collective investment funds and the trust instrument, bearing in mind that the people perceive them as relatively complex products.

“The country is growing and we are living a crucial moment; we are in the international spotlight."

What are the core reasons behind the growth of the sector?

Behind this success is the fact that we have strengthened our activities in the sectors of infrastructure and construction as our main growth engines. Also, the sector has participated in the administration of social security resources. Today, much of the pension liabilities of the country, as well as health activities, are handled through this fiduciary tool. In regional terms, Colombia is currently the second largest in Latin America after Mexico in terms of the size of the industry.

Which economic sectors currently require the trust sector's services the most?

At the moment, we have observed great dynamism and positive trends within the real estate sector, especially in shopping malls, office buildings, and housing. Lately, the hotel and tourism industry has also gained relevance. In terms of setting up new companies, trust tools have proven to be of great help for foreign investors in providing access to proper advice on fiscal policy issues to carry on their projects. Locals too, have benefitted from this. Our sector is an essential part in the process of improving the best practices of Colombian industry. We have worked with the authorities for the proper management of public assets, specifically in the administration of advanced payments, which, under the recent anti-corruption law, must be administered through a trust.

What are the risks a trustee company has to take to be successful in this sector in Colombia?

It is clear that the trust sector faces certain risks in the development of its activities; however, the sector has learned to manage them professionally following legal regulations to mitigate them. The main risk is operational, but this has been mitigated thanks to a better systematization and greater transparency in the technological and operational processes required for this activity. The effective performance of the industry and the monitoring from the SFC has clearly helped minimize the risks inherent in this business.

What role does the sector play in attracting foreign investors?

Trust companies possess extensive knowledge of the country and its regulatory framework, as well as experience in how to conduct business in a flexible and transparent way. This allows foreign investors to minimize risks and have an easier approach to a new market. In our particular case, the Colombian trust sector has rich experience in this segment.

What role does the industry play in the economic growth of the country?

Looking at the two types of license, for fiduciary business and investment funds, the sector is a mechanism that contributes to economic development and is an attractive destination for the reception of resources that can be managed through collective investment funds. The arrival of small and large foreign investors is also challenging. In general, the sector plays an important role in the economic growth of the country.

What role do collective fund investments play within the industry and the national economy?

Our sector is one of the three that hold an official license to operate and manage collective investment funds. Currently, the trust companies manage 77% of this market, the assets of which total $15.5 billion across 126 products. This vehicle is an efficient alternative for investment and saving, for both individuals and enterprises, and can be corroborated by the international recognition that has been given to mutual funds. In terms of the market positions of this mechanism among different segments of the population, transformations will surely occur in terms of the development of the culture of savings and investment in the long term.

What have been the landmark achievements of the sector over the past few years?

I believe the high levels of stability and cohesion within the sector are some of the most important achievements. In addition, we have been consolidating an increasing perception of transparency and confidence among our present and future customers and the authorities. Our goal is also to promote knowledge of the sector and the products it offers, continue generating mechanisms of best practice for business at all levels, and improve the service offered to customers.

What are the challenges facing the industry?

When reaching such high levels of performance, the challenge is to sustain them. Therefore, we have to work with greater commitment to maintain credibility and consolidate the financial indicators of the industry over the coming years. In this context, the trust industry, and therefore the Association, should continue working toward the further democratization of the tools and services offered.

What is your general outlook for the Colombian economy in the medium term?

The country is growing and we are living a crucial moment; we are in the international spotlight. We are geographically positioned in one of the best places in the world; we look to Europe and Asia, and we are at the crossroads between North and South. This is a very interesting moment for Colombia. We enjoy fiscal, political and regulatory stability, and we are proud of our competent industry, workers and entrepreneurs.

© The Business Year - September 2013