LatinFinance - May/June 2015 - 46

PENSIONS
MEXICO

Given Mexico's need for real estate and infrastructure financing, the new
private equity vehicle has disappointed. Both the government and pension funds
are exploring ways to make investing through CCDs easier. By Patrick Ferguson

Jumping through

hoops

exico's Grupo IGS
wrapped up a $100 million investment in
infrastructure and real estate projects in
March. The seed money came from two
certificados capital de desarrollo (CCD) transactions that the firm launched in 2011.
Within the next five years, IGS will divest
the CCDs. But the investment manager is
hardly finished with the specialized instrument. Chief executive and chairman Antonio Ruíz Galindo says IGS will issue more
CCDs to further tap Mexico's infrastructure
sector and venture into hotel real estate.
On the buy-side, the instruments have
long been in demand by Mexico's pension
fund managers, the Afores, he says.
"The Afores were saying, listen, we
need more vehicles to invest in longer term
assets," says Galindo. "So the regulators
created a way for Afores to invest a percentage of their funds under management into
private equity funds. Why? Because they
can deliver a better return or investment
than investing in debt, or other issuances."
So it was that, in 2009, CCDs were developed as an instrument through which
Mexico's pension funds can invest in private
equity. CCDs must list on a stock market and
receive approval from regulators. Then, the
administrators can leverage the capital by
tapping equal amounts from international
investors and loans.
Newer rules allow capital calls, meaning

46 L ATINFINA NCE.COM - May/June 2015

CCD managers can collect pledged money
from buyers of the certificates when the
need arises. Typically, a CCD has a lifespan
of 10 to 15 years.
CCD funds invest, and divest, in properties, machinery, loans, and other private
assets. But codes regulating investments are
vague, and uncertainty around the instru-

©REUTERS

M

ment has impeded the funds from investing more, say pension managers, CCD
mangers, and regulators.
The assets managed by Mexico's pension funds have grown close to five-fold
over the last decade, pushing up assets
under management to more than 2.4
trillion pesos ($163 billion). But, as of the
close of last year, only four of Mexico's 11
Afores had invested in CCDs. Since CCDs
were created six years ago, pension funds
managers have invested a little over 80 billion pesos ($5.2 billion) in CCDs. Last year,
Afores that invest in CCDs allocated about
3.5% of their assets to the funds.
"The low amount of investment reveals

Mexico's certificados de capital de desarrollo
offer pension funds easy access to long-term
infrastructure investments. Yet the asset class
needs to become more flexible, say those in
the industry


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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
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