LatinFinance - May/June 2014 - 47

Peru

Continued from page 46

Source: Ministerio de Hacienda y Crédito Público

The private pensions are split into three
fund types: conservative, moderate and
high risk. Some 95% of affiliates contribute
to the moderate fund. The AFPs mostly
invest in local equities and domestic
government bonds, which were badly
battered during the emerging markets selloff last year.
As things stand, the rules do not allow
Colombian pension funds to invest in any
fixed income securities below investment
grade. However, emerging market highyield bonds are among the most profitable
and AFPs are pushing the government to
make the rules more flexible.
"Overseas investments are managed
through both passive and active investment
strategies," says Miguel Largacha Martínez,
president of AFP Porvenir. "The main
foreign asset class is international equities,
not only in developed markets but also
in emerging markets. We invest through
exchange traded funds and also use active
managers who seek alpha generation
through a bottom-up investment process."
Felipe Peláez, co-head of asset
management at BTG Pactual's Colombia
unit, agrees that the main driver of
greater allocation abroad will be new
regulation. "There will definitely be greater
opportunities for international fund
managers," he says. "Institutional investors
execute most of the investment strategies
overseas through funds. Security selection
does not play a role for investment overseas;
they want to select good investment
managers for this type of investment."
Meanwhile, AFPs are also expected to
become one of the biggest investors in

ADVOCATING CHANGE: Colombian
finance minister Mauricio Cárdenas
wants funds to invest more abroad

infrastructure projects in Colombia. The
finance ministry introduced a new type
of infrastructure bond last year. And,
although last year AFPs only invested 0.6%
of their assets directly in infrastructure
projects, the government expects that AFPs
will be the largest investors in the roughly
$30 billion of infrastructure bonds it hopes
to issue over the next six years. LF

liquidity in every form. If that happens,
pension returns should start to go up.
Peruvian AFPs have total assets
under management of around $38
billion, according to Apoyo & Asociados
Internacionales, a Lima-based credit ratings
agency. Mutual funds amount to around $6
billion and insurance companies have $9
billion under management.
One further growth in the private
pension provision in Peru has been via the
arrival of a new AFP, Habitat, which is part
of the Chilean group by the same name.
Habitat, the second biggest in Chile, won a
bidding process to set up a new AFP in Peru
in December 2012.
As the industry sees new entrants and
the funds enjoy more inflows, Peru's
pension regulator also approved measures
to remove the obligation that it must
approve any investment in bonds, shares,
some structured products and short-dated
currency forwards.
"It passes on responsibility to the fund
managers to declare the eligibility of
the instruments they are going to use in
managing their portfolio - all the plain
vanilla instruments are going to be the
direct responsibility of the managers," Luis
Valdivieso, chairman of Peru's pension fund
association, told LatinFinance at the time of
the change.
"That provides more flexibility; it allows
a more speedy response to changes in
market conditions." LF

Diversifying assets
Colombian pension fund allocations
Investment allocations (%)
Manager

Fund

Assets
($bn)

Treasury
bills

Bank debt
(local)

Bank
deposits

Corporate
debt (local)

Equity
(local)

Bank debt
(int'l)

Corporate
debt (int'l)

Equity
(int'l)

Porvenir

Moderate

26.30

34.7%

2.1%

4.0%

1.9%

28.4%

0.0%

0.0%

14.5%

Protección

Moderate

21.07

35.2%

2.3%

3.3%

2.8%

30.3%

1.3%

0.1%

14.7%

Colfondos

Moderate

7.96

33.6%

2.2%

3.4%

1.0%

31.3%

0.9%

0.5%

17.2%

Skandia

Moderate
(pensionar)

2.84

33.1%

2.0%

0.9%

2.3%

31.0%

0.0%

1.0%

17.6%

Porvenir

Conservative

2.20

48.1%

5.5%

17.0%

3.6%

7.3%

0.0%

0.1%

10.2%

Protección

Conservative

1.52

47.6%

4.3%

18.6%

3.5%

10.4%

0.1%

0.2%

8.7%

Colfondos

Conservative

0.78

48.7%

7.9%

12.4%

1.8%

9.3%

1.5%

0.7%

9.75%

Protección

High risk

0.59

24.08%

0.59%

2.56%

0.20%

33.40%

0.11%

0.36%

31.7%

Skandia

Conservative

0.29

43.1%

12.9%

12.3%

2.9%

10.1%

1.1%

0.4%

8.7%

Skandia

High risk

0.10

25.8%

1.4%

0.7%

1.3%

34.3%

0.8%

2.3%

30.4%

Source: Superintendencia Financiera de Colombia; data to February 2014

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