The Latin American pension system has grown to more than US$900bn in assets under management, according to new research from global analytics firm Cerulli Associates.

"The pension industry in Latin America has been a key source of allocations for global managers and exchange-traded fund sponsors over the years, and promises to grow in importance as the size of these privatised social security systems quickly expand," comments Nina Czarnowski, senior analyst at Cerulli. "Local capital markets will eventually be unable to absorb these additional flows."

In their Latin American Distribution Dynamics 2013: Closed Markets Begin to Mature and Open report, Cerulli analyzes distribution and product development trends in the six key local mutual fund and pension fund markets--Brazil, Mexico, Chile, Colombia, Peru, and Argentina.

"Cross-border distribution to the regional pension industry remains the biggest opportunity. The good news is that, while highly competitive, it remains a fairly low-cost endeavor," Czarnowski explains. "In fact, some of the top global managers in the region have succeeded in gaining more than US$5bn each without a local office, or a local product."

To the credit of the pension managers themselves, performance, global expertise, and on-going support have been the most-sought-after characteristics when choosing among cross-border managers.

"There has been a flurry of merger and acquisition activity in the pension space in Latin America, beginning in the last quarter of 2012," Czarnowski continues.

Cerulli's research finds that the compulsory fund systems from Mexico to Chile are doubling in size every five to six years. As they amass large sums of assets, it will be imperative for them to channel greater percentages of their assets outside of their borders.