MONTERREY, Mexico–(BUSINESS WIRE)–The 2014 outlook for Siefores (pension funds) in Mexico is positive, according to a new Fitch Ratings report.
Assets under management (AuM) evolved favorably in 2013, exceeding MXN2 billion in October. Fitch expects the positive growth to continue through the natural growth of the sector and from Siefores returns (in the long-term investment horizon), the increase in voluntary savings and the incorporation of new funds in the market through the administration of the additional Siefores. In this regard, Consar (Mexico’s pension fund regulator) has had a very active role, favoring the diversification of portfolios and strengthens Afores (pension managers) investment processes and risk control. Fitch expects changes to Mexico’s pension system by the regulator to continue.
Afores portfolios show more diversification with a significant increase in investments like equities (national and international) as well as structured securities. As AuM continues to grow, the need for new investment instruments prevail and investments in international markets could increase in the future. Mandate operations will then become more important, which sets the tone for more diversification and a specialization pension system in Mexico.
Risk from international volatility is likely to continue. However, the capital losses that Siefores portfolios had during 2013 will not have a permanent impact on the managed resources. Fitch expects that the terms and due dates of investments will continue to lengthen, investment in reviewable rates instruments will increase, diversification (to reduce exposure to volatility) will continue, and risk measures by Afores will be strengthened.
During 2013, Basic Siefores pension funds provided an averaged compound annual return of 7.96% over a horizon of three years, which compares favorably with those obtained by other market instruments and over inflation. Fitch estimates Siefores returns to be more attractive in the future due to a more flexible investment regime and Afores exposure to financial institutions specializing in sophisticated global market values through mandate schemes.