Chile AFPs pass US$210bn AUM milestone in 2017

Wednesday, January 3, 2018

Assets under management by Chile's six private pension fund managers, or AFPs, grew 9.4% last year.

At the end of December assets under management totaled US$211bn, pension watchdog SP said in a statement.

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The fund with the highest risk profile, fund A, performed the best over the 12 months, generating returns of 15.44%. Of this, 10.04% corresponded to foreign instruments and 5.40% national instruments.

The worst performing fund was the most conservative, fund E, which generated returns of 1.01%. Fund C, with an intermediate risk level, generated returns of 7.51%.

At the end of October, the system comprised 10.4mn affiliates, up 2.3% from 12 months earlier. Of these, some 5.23mn were contributing monthly, up 1.9%. The average income of contributors was 786,533 pesos (US$1,295), up 3.3%.

In related news, local paper El Mercurio reported that, as of September, 3.2mn affiliates had a contribution gap of more than a year - a factor behind the small old age pensions that many Chileans tend to receive. The government is working to pass pension system reforms before president-elect Sebastián Piñera takes office in March. But it is unlikely to fully achieve its goal. Piñera will pick up the pension reform baton, although his proposal differs from that of the current government.

In November, Chile introduced new regulations governing investment in alternative assets. The rules permit private pension fund managers and the country's solidarity unemployment fund to invest in areas such as non-residential real estate, concessions, and international private equity and private debt placement. Prior to this, funds could invest in these assets, but indirectly.

A maximum of 10% of the size of fund A can be invested in alternative assets. The maximum is 8% for fund B, 6% for fund C, 5% for fund D and 5% for fund E. The government's solidarity unemployment fund can invest up to 5%. The central bank can amend the limits if it thinks that it is needed.

Peru is also mulling changes to AFP investment rules.