SANTIAGO, Chile--(BUSINESS WIRE)--The revamped Chilean funds' regulatory framework aiming to promote the development of the local asset management industry has positive implications for the Chilean capital markets as well, according to Fitch Ratings.
The law, known as Ley Unica de Fondos (LUF), was approved in November 2013 and streamlines the regulatory framework by providing operational efficiencies for asset managers. It also introduces greater regulatory oversight in an effort to provide further investor protection and protect market integrity.
Importantly, the law introduces changes to the tax code that could increase demand for Chilean financial assets and make local Chilean asset managers more competitive in the international arena, thus taking further steps towards integration with other Latin American capital markets. This is consistent with other integration efforts like the MILA (Mercado Integrado de Latino America) initiative.
Chile's new fund regulation creates a single regulatory framework applicable to the management of third party funds, providing a common standard and avoiding asymmetries between funds. The legal structure decreases the operational burden for local and foreign fund managers, streamlining the creation of investment vehicles, which would promote competition in the local fund industry.
The LUF also provides the Superintendencia de Valores y Seguros (SVS) (Securities and Insurance Regulatory Entity) with more tools to oversee asset managers. In this regard, the law emphasizes the strength of risk management, the knowledge and suitability of relevant staff, and the establishment of policies, procedures and controls to begin and support operations.
The LUF also incorporates tax benefits that increase the competitiveness of Chilean asset managers in international markets (for the management of foreign investor funds, when investing in foreign assets), as well as tax incentives for foreign investors to invest in Chilean assets. These changes will likely result in greater demand for Chilean assets from foreign investors, and thereby provide a new source of funding to the domestic capital market and to Chilean companies seeking to raise capital.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Chile's Funds Industry Sees Regulatory Overhaul