As the pension fund business in Latin America moves toward privatization, more U.S. banks are positioning themselves to take advantage.
Last week Mellon Bank and its fund subsidiary, Dreyfus Corp., formed a three-pronged alliance with Chilean banking company Bicecorp SA. Under the venture, Mellon will acquire stakes of 49% to 50% in three investment management subsidiaries of the Santiago-based institution.
Two of the stakes are in Chile-based units; the third, with a Bicecorp subsidiary registered in Bermuda.
The move follows a similar joint venture that Pittsburgh-based Mellon formed in November, acquiring a 40% stake in a Brazilian bank, Banco Brascan.
Mellon is not alone in its desire to have a tangible presence in Latin America. In recent years, Bankers Trust New York Corp., Citicorp, and BankBoston Corp. have all established toeholds in the region's pension business.
Terms were not disclosed, but Christopher M. "Kip" Condron, Mellon vice chairman and Dreyfus president and chief executive officer, said it was a cash deal.
The deal has already gotten regulatory approval and will close in "a matter of days," Mr. Condron said Friday.
Mellon's alliances in Latin America are an effort to take advantage of an investment management trend occurring not just in that region but also in Europe, said Mr. Condron. "Private pension systems are beginning to grow where historically there was a move toward public pension systems." And like Americans in the early 1970s, investors in Latin America are beginning to move from straight bank deposits to mutual funds, he said.
The Chilean deal will include establishment of offshore funds bearing the Bicecorp and Dreyfus names, Mr. Condron said. Through Dreyfus, Mellon has $100 billion under management.
Bicecorp has five funds, but Mellon hopes that will "double several times over," said Mr. Condron. He declined to disclose the assets under management at Bicecorp.
Mr. Condron observed that there may also be synergies between this alliance and Mellon's deal to acquire Founders Asset Management, Denver.
Founders' Passport Fund, an international portfolio, could offer "cloning possibilities," he said. Mellon is acquiring the company for a reported $275 million.
Other banks are also likely to strike similar deals.
"Chile has sort of set the pattern for the privatization of pension plans," said Burton J. Greenwald, a mutual fund analyst based in Philadelphia.