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FIAP > Boletín – Recientes > Pension Note No. 46 – Investment Portfolios of the Latin American Pension Funds / June 2020

Pension Note No. 46 – Investment Portfolios of the Latin American Pension Funds / June 2020

7 July, 2020
  • Colombia, Chile and Peru, the first 3 countries to implement individually funded systems, have more diversified investments in Fixed Income (FI) and Equities (Eq), between 40% and 60%, respectively, while the Dominican Republic, El Salvador, Costa Rica and Kazakhstan, which have less mature individually funded systems, have more than 80% of their portfolios invested in Eq instruments, and a significant part of them in government securities.

 

  • Despite the considerable differences in the PF investment portfolios, almost all of them have high real historical annual returns (from the outset of their respective Pension Systems), with Chile leading the ranking at 8.2%, Colombia at 7.5%, Uruguay 7.4% and Peru 7.0%. The lowest results, although always positive and of significant magnitude, occur in the individually funded systems of countries that have little or no investment in Eq. instruments.

 

  • The considerable differences in the PF investment portfolios in Latin American countries could be explained by the maturity of the individually-funded pension systems, investment regulations, the development of local capital markets and the existence of Multifunds.

 

  • On analyzing the diversification of the PF investment portfolios over an extended period of time, one can observe:
    • A drop in investment in government securities over time, stabilizing at values between 30% -40% of the total.
    • That investment in corporate instruments (domestic companies) fluctuates between 20% -30% of the total.
    • A drop in investment in financial instruments, mainly bank debt, stabilizing at just over 10%.
    • Significant growth in foreign investment, remaining close to 30% of the portfolio in the last few years.

Download the full Note here.

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