LatinFinance - May/June 2015 - 39

Regional bid
When it comes to
investing next door,
pension administrators
are still restricted

SPECIAL
REPORT
PENSION
INVESTORS

PAGE 40

Under the microscope
Chilean funds bid to
keep strong returns as
regulatory changes loom
PAGE 43

Going private
Mexico's Afores call
for more flexibility to
invest in CCDs
PAGE 46

Adaptation game
Pension regulators have a delicate
balance to strike. On one side, they want
to see returns for their country's fund
administrators flourish, expanding the
pension pot as much as possible for their
retirees. On the other hand, no-one wants
to be responsible for opening the door to
reckless investing that leads to a loss of
principal for those same pensioners.
The sensitivity of the debate means that
regulations on pension fund investments
must evolve slowly.
But across Latin America, there
is movement afoot. In Chile, the
Bravo Commission is deliberating on
recommendations to improve the
performance of the pensions system. Set
up by Michelle Bachelet's government
shortly after it came to power, the
Bravo Commission seeks to review the
country's pension system and make
recommendations to improve it.
The commission has retirees on its side:
71% of those it surveyed said their pensions
didn't cover their needs. What's more,

79% said they strongly agreed with the
idea of creating a state-run pension fund to
compete with the private sector.
The commission is due to report in
August, and the country's pension funds
are steeling themselves for the results. In
the meantime, they have plenty to keep
them busy as they seek to repeat the
blockbuster returns of the past year (page
43).
Elsewhere, Mexican pension funds' bid
for greater flexibility in their investment
strategy continues. The Afores may only
invest 20% of their assets internationally -
one of the lowest caps in the region - and
hence seek strong-yielding opportunities
at home.
The certificado de capital de desarrollo
instrument, designed to enable Mexico's
pension funds take private equity
investments particularly in infrastructure,
has had a mixed response from the
Afores (page 46). Some, such as Afore XXI
Banorte would like to vastly increase their
allocations to the asset class but struggle

to get enough CCD paper. Yet still seven of
Mexico's 11 pension fund managers don't
invest in the instruments at all.
The question of diversification is no
simpler for Latin American pension funds
wanting to buy assets in neighboring
countries (page 40). In most cases, these
count as international investments.
Liquidity and exchange rate difficulties are
also a deterrent.
The argument for liberalization here is
not clear-cut. Investing regionally may give
exposure to a different set of companies
and risks than those in the home country
- while at the same time being more
familiar than, say, instruments in Asia or
Europe. Yet the fact that many countries'
macroeconomic fortunes move in similar
patterns to their regional counterparts
raises questions as to the true depth to
such diversification.
Nonetheless, here, too, regulatory
changes are underway, most prominently
under the umbrella of the Pacific
Alliance. LF

May/June 2015 - L ATINFINA NCE.COM 39


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LatinFinance - May/June 2015

Table of Contents for the Digital Edition of LatinFinance - May/June 2015

Contents
LatinFinance - May/June 2015 - Cover1
LatinFinance - May/June 2015 - Cover2
LatinFinance - May/June 2015 - Contents
LatinFinance - May/June 2015 - 2
LatinFinance - May/June 2015 - 3
LatinFinance - May/June 2015 - 4
LatinFinance - May/June 2015 - 5
LatinFinance - May/June 2015 - 6
LatinFinance - May/June 2015 - 7
LatinFinance - May/June 2015 - 8
LatinFinance - May/June 2015 - 9
LatinFinance - May/June 2015 - 10
LatinFinance - May/June 2015 - 11
LatinFinance - May/June 2015 - 12
LatinFinance - May/June 2015 - 13
LatinFinance - May/June 2015 - 14
LatinFinance - May/June 2015 - 15
LatinFinance - May/June 2015 - 16
LatinFinance - May/June 2015 - 17
LatinFinance - May/June 2015 - 18
LatinFinance - May/June 2015 - 19
LatinFinance - May/June 2015 - 20
LatinFinance - May/June 2015 - 21
LatinFinance - May/June 2015 - 22
LatinFinance - May/June 2015 - 23
LatinFinance - May/June 2015 - 24
LatinFinance - May/June 2015 - 25
LatinFinance - May/June 2015 - 26
LatinFinance - May/June 2015 - 27
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LatinFinance - May/June 2015 - 33
LatinFinance - May/June 2015 - 34
LatinFinance - May/June 2015 - 35
LatinFinance - May/June 2015 - 36
LatinFinance - May/June 2015 - 37
LatinFinance - May/June 2015 - 38
LatinFinance - May/June 2015 - 39
LatinFinance - May/June 2015 - 40
LatinFinance - May/June 2015 - 41
LatinFinance - May/June 2015 - 42
LatinFinance - May/June 2015 - 43
LatinFinance - May/June 2015 - 44
LatinFinance - May/June 2015 - 45
LatinFinance - May/June 2015 - 46
LatinFinance - May/June 2015 - 47
LatinFinance - May/June 2015 - 48
LatinFinance - May/June 2015 - Cover3
LatinFinance - May/June 2015 - Cover4
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