Regulator: Pension asset returns hit 3.73% since market inception

Colombia's AFP private pension funds have averaged a 3.73% real annual return on assets since their creation in May 1994, or 14.4% in nominal terms, according to a report by financial services regulator Superfinanciera. Last year the AFPs showed a 4.48% nominal return on assets in line with inflation. In the 2005-08 period, AFP accumulated returns averaged 0.2% in real and 6.16% in nominal terms annually. The AFPs increased combined assets under management 14% to 58.3tn pesos (US$24.7bn) last year compared to 2007, Superfinanciera said. Colombian AFPs managed to pare losses from the global financial meltdown in 2008 as they heavily tilted their investment portfolios towards safer instruments such as government bonds, Colombian local pension fund association Asofondos president Santiago Montenegro told BNamericas. A weaker local currency also boosted AFP returns in pesos last year, he said. The Colombian peso is one of Latin America's fastest depreciating currencies, losing 30% against the US dollar in the year-ended January. Colombia's pension reform in 1994 was undertaken by the government to save the state social security system from bankruptcy, resulting in a mixed two-pillar public and private structure. The number of affiliates grew 9.6% to 8.57mn last year, but only 53% contribute regularly to the system, Superfinanciera said. Locally owned AFP Porvenir and AFP Protección stayed on top in terms of assets under management with 27.2% and 25.1% respective market shares as of end-2008. Citi (NYSE: C), BBVA (NYSE: BBV), ING (NYSE: ING) and Skandia Colombia also operate private pension fund managers in Colombia's mandatory pension system. Assets under management in the voluntary pension industry grew 6.5% last year to 7.52tn pesos, with the number of affiliates rising 5.8% to 525,599. Skandia Colombia again held the top spot in the voluntary pension industry with a 31.5% market share in assets, Superfinanciera said.