What role does Fiducia play in Ecuador's financial sector?
Fiducia began its active presence in the financial sector in Ecuador in 1994. Initially, we positioned ourselves as one of the first providers of financial services for real estate projects. Later, we expanded to defeasance trusts, administrative trusts, and then securitization. We created the first securitization system in Ecuador, which consisted of the value of the cash flows resulting from the money spent by foreigners in Ecuador using MasterCard credit cards. MasterCard decided to securitize these flows, and we realized this transaction in 2003. This opened up an expanded method for us to participate in Ecuador's capital markets.
What is your current characterization of Ecuador's capital markets?
From our point of view, in order for Ecuador's capital markets to play a more significant role in the country's financial sector, the two sides of the capital markets, the issuers of non-bank securities on one side and the institutional investors that are going to purchase these securities on the other, need to be compatible. Securities being issued need to be designed for the investors who are going to invest in them. Speaking about capital markets in Ecuador, it is important for us to talk about the legal reform that took place in 2012. Until 2012, banking institutions were allowed to own brokerage houses and insurance companies and have fund administrators. In that year, the law that required that any shareholders of banking institutions to divest any ownership of investment or insurance companies was amended. As a result, new Ecuadorean capital markets were born without the participation of commercial banks. Another important factor in Ecuador's capital markets is the fact that the majority of the country's pension funds are concentrated in the IESS. This limits the role of pension funds in the country's capital markets, which presents a challenge for the country, because the existence of institutional investors with a high level of technical capacity is a fundamental factor in the development of capital markets.
What is your asset allocation strategy?
The portfolio structure of each of our funds depends on the objective of that fund. Currently, the assets in which we have been investing are fundamentally domestic. This is for two reasons; the first is because Ecuador is a dollarized country, which is an important advantage, and the profits from local investments are in US dollars. Secondly, as Ecuador has taxes on foreign capital flows it is more difficult to move money in and out of the country. As a result of these fees, the Ecuadorian dollar is only worth about 95% of the dollar internationally. This means that it makes more sense to invest in Ecuador and keep profits in the country. As a result, this makes foreign investments less competitive because it is more difficult to invest in them and repatriate the profits. This is a secondary factor though. The primary factor is that in Ecuador, there is still a great need for the availability of better financial instruments through the capital markets. This need exists on two fronts. On one side, it is necessary for companies that are looking for long-term financing for new business ventures of the kind that are usually not financed through bank loans. On the other side, the deposit rate that financial institutions are paying for savers is not appealing when inflation is factored in.
Have you seen interest in your funds from international investors?
Yes, we have hosted institutional investors, who usually manage family wealth funds. It appears to me that they are looking for low-risk funds in emerging markets. They come to us because we administer the only fund in Ecuador that has a risk rating of AAA-. They are looking for good risk ratings and, of course, profitability. Our funds yield such high profitability because they include corporate securities with positive interest rates.