Pension funds recover 2008 losses, look to infrastructure, foreign investments

- Wednesday, October 28, 2009

Pension funds recover 2008 losses, look to infrastructure, foreign investments

Funds managed by Peru's private pension fund managers, the AFPs, have recovered the losses they suffered in 2008, government news service Andina reported the AFP association as confirming.

The country's AFP system offers three funds with different risk profiles. In 2009 thus far, fund one has recorded a return of 12.19%, fund two a return of 29.80% and fund three a 52.96% return, the paper quoted AFP Integra investment manager Gonzalo de las Casas as saying at a conference organized by the association.

Since the beginning of 2008, fund one has had a return of 7.75%, fund two a return of 5.01%, and fund three a drop of 4.69%, he said.

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In 2010 the Peruvian economy is poised to grow close to 5%, which should mean improved growth for the pension funds, de las Casas added.

INFRASTRUCTURE INVESTMENTS

In the next two years, AFPs will invest approximately US$1bn in infrastructure development through the two infrastructure investment funds currently available to them, local press quoted AFP Prima investment manager Alejandro Pérez-Reyes as saying at the conference.

"The AFPs are ready to develop these projects and are waiting for the final authorization," he said, adding that one fund operates as a trust and invests in debt instruments, while the second invests in the capital of companies that develop infrastructure.

FOREIGN INVESTMENT LIMIT

"If the pension funds keep growing at the pace they have been, soon enough a limit on foreign investment of 30% won't be enough, while a level of 35-40% would be more appropriate," press reported AFP Profuturo investment manager Pedro Grados as saying at the conference.

Peru's central bank BCR on October 17 raised the limit for AFPs' investment in foreign instruments to 22%, and there has been talk that the next increase would be to 30%.

AFPs' exposure to foreign investment is nearing 20%, and Grados added that with increased inflows into the pension funds and the fact that foreign markets are deeper and more liquid, the AFPs will need such an increase in the near future.

Peru's AFPs saw assets under management rise to 66.938bn soles (currently US$23.002bn) as of September 30, up 25.2% compared to 12 months prior.

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