Paper: Exec says AFPs can manage funds 2-3 times larger

Wednesday, October 12, 2005

Peru's five private pension fund managers (AFPs) have the capacity to manage funds two or three times larger than today, local daily Expreso quoted AFP Horizonte's CEO Javier Marín as saying.

Peru's AFPs managed funds totaling 28.2bn soles (US$8.67bn) in July.

Scale economies in the industry make it unlikely for any player to focus only on the higher income segments, Marín reportedly said.

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Banking and insurance regulator SBS has only approved Horizonte's permanency plan, he said. Peru's other four AFPs have also presented permanency plans to the SBS, and are awaiting approval.

The country's five AFPs have created the permanency plans in a bid to retain clients amid the recent outbreak of a price war.

Since AFP Prima entered the system in August, the industry's four other players, Unión Vida, Integra, Horizonte, and ProFuturo have lowered their commissions in response to Prima's aggressive pricing strategy.

Marín said the system faces a challenge in developing a pension culture and give affiliates more participation via the multifund system that will debut in November.

The AFPs 3.5 million affiliates were given until October 3 to choose one of three fund options depending on their age and respective risk profile.