ACROSS SECTORS

Colombia 2015 | FINANCE | B2B: INTERLINKED INDUSTRIES

Real estate and insurance firms are interlinked through investment and security strategies.

Daniel Cortés McAllister
DANIEL CORTÉS MCALLISTER
President
Old Mutual Colombia
Pablo Trujillo Tealdo
PABLO TRUJILLO TEALDO
Director
Acción Fiduciaria

What trends have you noticed, and what are your expectations for your respective sectors moving forward?

Daniel Cortés McAllister Up until now, the biggest contributor to fiduciaries was mutual funds, or Fondos de Inversion Collectiva (FICs). A lot of these grew to have Fiduciaria Administration y Pagos, which is basically a government or corporate mandate to set money aside and make payments. This is usually seen for the construction of roads and for government contracts where the process needs a third party to ensure that the flow does not go from one party to the other without certain controls. Before the mortgage crisis in 1999, a constructor erecting a building would sell future units that weren't yet built. When the crisis hit, many of those constructors were using that money for other purposes. The industry went through a process that placed the fiduciary companies in the middle. The buyers would only deposit their money in these trust companies with a specific mandate, and not until a certain number of sales were achieved.

Pablo Trujillo Tealdo Real estate in Colombia is attractive for local and foreign investors. There are a lot of people coming to Colombia to invest in infrastructure and construction. People feel that Colombia is an attractive destination these days. For now, prices are going up and demand is stable. Businesses are sound good and providing healthy returns to investors. Energy projects in Colombia are also very attractive, but these are restricted to the bigger players. The only way for a small investor to enter the energy market is through a public company that has shares. There are currently 11 free zones. These are in the form of, for example, health free zones, oil field free zones, and industrial free zones. We are also involved in various PPP projects, the biggest one, which is Bacatá, and another one in Barranquilla called Clinica Portoazul, which is a hospital. We are proud of these new kinds of investments that people are putting in their portfolios, which make big projects possible, and also return profits to people that they are not used to having, as they are not used to participating in these kinds of projects.

You have been a critic of some of the pension funds and the way they invest in AAA companies. How do you think they need to diversify their portfolios to become more sustainable?

DM The regulations force all pension funds to invest alike. There is a minimum return that you have to attain, and it is a percentage of the industry average. Companies do not want to deviate too much, in case something goes wrong. If I have a great return, it is for the customer, and if I have a low return, the company could end up paying for the difference. This starts a herd-effect whereby all actors act and move in the same way so as not to stand out and expose themselves to too much risk. What we have seen historically, especially in the last 12 to 13 years, is that buying Colombian assets was good business. In the early 2000s, Colombia was almost a failed state. The prices were fixed accordingly, the exchange rate was high, as were interest rates, and we started to see a fixed income market develop. When the first ten-year securities came out, they were priced at 18-19%, whereas now that figure is close to 6%. It was hard for a local institution investor to justify investing abroad.

What have been your most significant projects in the last year?

PT The most significant for us is real estate, as we have more than 500 projects in real estate. With these kinds of projects, they are perpetually open to investment. This generally occurs in the hotel and clinic sector. This year we are going to roll out a forestry business, and there are also closed businesses selling property. We also offer fiduciary rights funding projects. These investments are popular because the property that people own is not a fund, but rather, something specific.