Afore InverCap aims to double market share this year

Mexican private pension fund manager Afore InverCap aims to double its market share by assets under management to 2.6% this year over end-2006, investment director Arturo Hanono told BNamericas. Last year, InverCap recorded the industry's second highest annual increase in terms of assets under management, which rose fourfold to 9.30bn pesos (US$863mn) compared with end-2005. The firm's market share jumped to 1.3% from 0.3%. InverCap's strategy for growth consists of a combination of high returns and low commissions, the executive said. "We will continue ranking among the Afores that offer one of the highest rates of return and lowest commissions in the market. Only a few Afores offers both," said Hanono. The Afores offer two classes of funds: Siefore Básica 1, designed for workers near retirement age, and Siefore Básica 2, the largest, designed for younger affiliates. Afore InverCap manages Mexico's best-performing pension funds. The average 36-month real rate of return for InverCap's Siefore 1 stood at 6.6%, compared to an industry average of 5.0% at end-February. And the real rate of return for InverCap's Siefore 2 was 7.7%, while the industry average was 5.7%. The strong performance of InverCap's funds reflects the firm's bet on long-term instruments, Hanono said. At end-February, the average maturity of InverCap's Siefore 1 instruments was 4,250 days, well above the industry's average of 2,564 days. And the average maturity of InverCap's Siefore 2 instruments was 3,468 days compared to the industry average of 2,923 days. InverCap's commission stood at 2.17% at end-February, the eighth lowest in the market compared to an industry average of 2.29%. However, the picture is not so rosy for Mexican private pension funds as a whole since players are engaged in a price war that led to 14 commission cuts last year and a 52% increase in marketing expenses. At the same time, top players BBVA Bancomer and Banamex have seen their market shares steadily decline over the past few years. Banamex's share dropped to 18.7% at end-2006 from 23.1% at end-2003, while closest rival Afore Bancomer saw its share shrink to 16.9% from 21.1% in the same period. "It seems very clear to me that 2007 will be much more difficult than last year," said Hanono, who anticipates big players will start to compete strongly on price to regain market share. As of February 28, Afore InverCap held 10.5bn pesos in assets under management, ranking 13th among 21 players with a 1.4% market share.