September 2013
Confidential – Not for release without prior written permission from the authors
Copyright 2013 - all rights reserved to Campollo Consulting LLC & Wall’s Street Advisor Services LLC. Nothing
in this presentation or the service it describes should be considered either legal or investment advice.
Latin America Pension Funds & Their
Investment Portfolios
Our Purpose today is to provide you with:
 An overview of the funded pension systems of
Latin America;
 Features of their investment portfolios;
 A look at what the near future may hold for
these;
 With a focus on the five ‘Major Markets’.
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The presentation draws from our Guide to Latin
America Pension Funds 2013 service & related
research
TM
 11 countries - all 10 with mandatory funded
contribution plans + Brazil
 400+ pension funds’ investment portfolios
 $800+ bn. in assets (as of end-2012)
 Country reports on investment portfolio
regulations and industry developments
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LatAm Pension Funds’ Potential
Latin America is quickly becoming a “strategic marketplace for money
management ” – State Street Bank (Nov. 2011) …. WHY?
 Have scale - Pension Funds’ assets at end-2012 nearly $810 bn.
 Steady high growth - demographics (generally young populations) &
national policies (promoting retirement funding) underlay growth
prospects – AuM to grow over the next 5 years at about 15% p.a.
 Opportunities for new financial products and services - surging
contributions’ growth, prudential need for asset diversification, and
regulators’ recognition of the virtues of diversification, in both domestic
& foreign assets, are opening opportunities.
 Pension Funds need more investment ‘space’ - Pensions’ investments in
local stocks are approaching their ‘single issuer exposure limits’ – they are
out-growing their home markets.
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LatAm Pension Funds’ Growth Potential
- Relatively low Assets-to-GDP levels suggest great potential to grow
- Double-digit compound annual growth rates projected to continue
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LatAm Pension Funds – Institutional Types
Defined
Defined
Benefits Contributions
Country
Brazil
Chile
Mexico
Colombia
Peru
Uruguay
Bolivia
El Salvador
Costa Rica
Dominican Rep.
Panama
X
X
X
X
X
X
X
X
X
X
X
X
Mixed
DB/DC
DC via
Voluntary
multifondos
DC
X
X
X
X
X
X
X
X
X
X = mandatory participation for salaried employees
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Brazil’s Institutional System – The BIG Exception
 First established in 1940s, Pension Plans are corporate,




government, or multi-employer sponsored.
Defined Benefit Plans (‘Plano Beneficio Definido’)dominate in
terms of assets and affiliates.
Variable Contribution (‘Plano Contribucao Variavel’) and
Defined Contribution (‘Plano Contribucao Definida’) are
fastest-growing types.
Plans, particularly among related sponsors, frequently join a
“Pension Fund” (‘Fundo de Pensao’), which provides
investment and administrative services.
Previ, the largest Brazilian Fundo de Pensao by total assets
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The Multifondos Systems - Country examples
 Chile introduced mandatory individual capitalized account funds in 1981
– options for affiliates among managers, but not for risk/return
preferences
 A multifondos system gives pension affiliates an option among a series of
risk-based funds offered by an investment manager (AFP)
 Each AFP provides a series of risk-based funds managed within the same
detailed sets of investment requirements/restrictions
 Permitted maximum exposures to Equities & Foreign illustrate:
Year
Number of
Multifondo funds per
Limit to Equities Market s Adopted AFP
Most Aggressive
Chile
2002
5
80%
Peru
2005
3
80%
Mexico
2008
4
40%
Colombia
2011
3
70%
Limit to Equities Least Aggressive
5%
10%
<5%
20%
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Limits to Foreign
Assets - Most
Aggressive
100%
40%
20%
70%
WSAS
Limits to Foreign
Assets - Least
Aggressive
35%
40%
20%
40%
8
Pension Funds’ Assets by Country, 2012- 2007
5 Major and 6 Minor Markets
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Country shares’ of LatAm Pension
Funds’ Total Assets, end-2012
Brazil
Chile
Mexico
Colombia
Peru
Uruguay
Bolivia
El Salvador
Costa Rica
Dominican Rep.
Panama
1% 1%
1%
5%
1%
0%
0%
10%
42%
18%
21%
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Pension Funds – Number by Country, 2012
Dominican Rep.,
9
Peru, 12
Costa Rica, 24
Uruguay, 4 Bolivia, 2
Panama, 3
El Salvador, 2
Chile, 31
Colombia, 42
Mexico, 65
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Brazil, 330
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Latin America Pension Funds
Overview of Asset Allocations end-2012 (%)
Total
Total
Total
Fixed
Investments Equities of which of which Income
US$
US$
Domestic Foreign US$
Total
Total
Number Assets
of Funds US$
All Markets Aggregate 406 749,886
100%
31%
21%
Brazil
Chile
Mexico
Colombia
Peru
Uruguay
Bolivia
El Salvador
Costa Rica
Dominican Rep
Panama
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
30%
38%
22%
38%
52%
30%
12%
9%
29%
29%
212 285,143
31 168,006
65 144,207
42 79,358
12 37,982
4
10,389
2
7,875
2
6,901
24
4,716
9
4,361
3
947
1%
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10%
26%
13%
9%
23%
1%
WSAS
P/E
of
&/or
of which which Venture Real
Domestic Foreign Capital Estate
59%
54%
50%
59%
74%
52%
48%
97%
92%
99%
92%
100%
99%
50%
45%
71%
50%
39%
89%
92%
93%
92%
100%
99%
4%
14%
2%
2%
9%
8%
3%
1%
2%
3%
4%
3%
4%
6%
6%
2%
1%
12
Top 25 Pension Funds – Total Assets 2012
US$ millions
Rank Pension Fund
1 Previ-Previ Plano I (BD)
Total Assets
Country US$
Rank Pension Fund
Total Assets
Country US$
13 Banamex Siefor 3
Mexico
8,033
Brazil
80,130
14 Provida - D
Chile
8,015
2 Petros-Plano Petros Sistema Petrobras (BD) Brazil
29,802
15 Habitat -B
Chile
7,952
3 Funcef-Plano Beneficio- Reg/Replan Consolidado
Brazil
(BD)
22,614
16 Prima Fund 2 Balanced
Peru
7,900
4 Provida - C
Chile
20,414
17 Integra Fund 2 Balanced
Peru
7,808
5 Porvenir Oblig. Moderado
COL
18,152
18 Provida - B
Chile
7,749
6 Habitat -C
Chile
15,994
19 Bancomer Siefor 3
Mexico
7,517
7 Proteccion Oblig. Moderado
COL
15,126
20 ING Oblig. Moderado
COL
7,448
8 Capital - C
Chile
13,284
21 SURA Siefor 3
Mexico
7,252
9 Cuprum - C
Chile
11,108
22 Cuprum - A
Chile
6,841
10 BBVA Horizonte Oblig. Moderado
COL
9,778
23 Bancomer Siefor 2
Mexico
6,782
11 Banamex Siefor 4
Mexico
9,064
24 Habitat -A
Chile
6,629
12 Colfondos Oblig. Moderado
COL
8,465
25 Provida - A
Chile
6,597
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Top 25 Pension Funds- Fixed Income 2012
US$ mn
Rank Pension Fund
1 Previ-Previ Plano I (BD)
Fixed Income
Country Total US$
Rank Pension Fund
Fixed Income
Country Total US$
Brazil
24,622
13 Republica
URU
5,670
2 Petros-Plano Petros Sistema Petrobras (BD) Brazil
12,376
14 Banamex Siefor 4
Mexico
5,602
3 Provida - C
Chile
12,129
15 Banamex Siefor 3
Mexico
5,495
4 Habitat -C
Chile
10,031
16 Bancomer Siefor 3
Mexico
5,487
5 Porvenir Oblig. Moderado
COL
9,076
17 Bancomer Siefor 2
Mexico
5,229
6 Funcef-Plano Beneficio- Reg/Replan Consolidado
Brazil
(BD)
8,942
18 SURA Siefor 3
Mexico
5,076
7 Capital - C
Chile
8,177
19 FRP
Chile
4,907
8 Proteccion Oblig. Moderado
COL
7,349
20 XXI Siefor 2
Mexico
4,879
9 Cuprum - C
Chile
6,702
21 Banamex Siefor 2
Mexico
4,844
10 Provida - D
Chile
6,508
22 BBVA Horizonte Oblig. Moderado
COL
4,718
11 Cuprum - E
Chile
5,683
23 Habitat -D
Chile
4,716
12 Habitat -E
Chile
5,677
24 Capital - D
Chile
4,501
25 XXI Siefor 4
Mexico
4,472
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Top 25 Pension Funds – Total Equities 2012
US$ millions
Equities
Rank Pension Fund
Country Total US$
1 Previ-Previ Plano I (BD)
Brazil
47,417
2 Petros-Plano Petros Sistema Petrobras (BD)
Brazil
10,985
3 Porvenir Oblig. Moderado
COL
7,708
4 Provida - C
Chile
7,303
5 Funcef-Plano Beneficio- Reg/Replan Consolidado (BD) Brazil
6,970
6 Proteccion Oblig. Moderado
COL
6,392
7 Habitat -C
Chile
5,558
8 Cuprum - A
Chile
5,202
9 Habitat -A
Chile
5,022
10 Provida - A
Chile
4,975
11 Capital - A
Chile
4,877
12 Capital - C
Chile
4,493
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Rank Pension Fund
13 Provida - B
14 Habitat -B
15 BBVA Horizonte Oblig. Moderado
16 Integra Fund 2 Balanced
17 Cuprum - C
18 Colfondos Oblig. Moderado
19 Prima Fund 2 Balanced
20 Capital - B
21 ING Oblig. Moderado
22 Horizonte Fund 2 Balanced
23 Cuprum - B
24 Valia-Beneficio Definido (BD)
Equities
Total
Country US$
Chile
4,381
Chile
4,374
COL
4,211
Peru
4,085
Chile
4,074
COL
3,622
Peru
3,556
Chile
3,338
COL
3,231
Peru
3,136
Chile
3,065
Brazil
3,006
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Brazil – Asset Allocations by Plan Types
(Local Currency bn, end-2012)
Defined Benefits Plans have the lion’s share (source: Abrapp)
Defined Benefit
R$ bn
% DB
Defined Contribution
% Pensions
AUM
R$ bn
% DC
% Pensions
AUM
Variable Contribution
R$ bn
% VC
% Pensions
AUM
Fixed Income
260 55%
67%
49
85%
13%
79
78%
20%
Equities
162 34%
88%
7
12%
4%
15
14%
8%
Structured
14
3%
82%
0
1%
3%
3
3%
16%
Foreign
Investments
0
0%
99%
0
0%
0%
0
0%
1%
Real Estate
23
5%
91%
0
1%
1%
2
2%
8%
Operations with
Participants
12
3%
75%
1
1%
5%
3
3%
20%
1
0%
57%
1
1%
24%
0
0%
18%
100%
75%
9%
102
Other
Total
474
58
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100%
WSAS
100%
16%
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Brazil – Returns by Plan Types
2010-2012
Defined Benefit
Defined
Contribution
Variable
Contribution
2010
13.8%
9.8%
11.7%
13.3%
2011
10.0%
8.6%
10.0%
9.8%
2012
15.4%
14.9%
15.6%
15.4%
Returns
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Pension Plans
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Brazil –Consolidated Pension Portfolio Distribution
US$ bn, end-2012
Consolidated Pensions Portfolio by Asset Class
Dec. 2012
US$ bn
Fixed Income
Public Debt
Private debt
Special Vehicles
Investment funds - Fixed Income
Equities
Shares
Investment Funds- Equities
Structured
Emerging Companies
Participações
Real Estate Funds
Foreign Investments
Shares
Fixed Income
Real Estate
Operations with Participants
Lending to Participants
Real Estate Financing
Other
Total
194
62%
48
15%
16
5%
104
33%
130
41%
90
29%
44
14%
46
15%
8
3%
0
0
7
2%
1
0%
0
0%
0
0%
0
0%
13
4%
8
3%
7
2%
1
0%
1
0%
314
100%
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Chile – Features of the Multifondos System
Distribution of Assets by Fund Type, end-2012
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Chile – Features of the Multifondos System
Chile - Investment Portfolios Distribution end-2012
A
B
Más riesgoso
% Fondo
C
D
Riesgoso
Intermedio
% Fondo % Fondo
E
Más
Conservador conservador
TOTAL
% Fondo % Fondo
% Fondo
Domestic Assets
30.1%
49.2%
63.4%
77.1%
97.6%
61.5%
Equity Instruments
20.8%
20.9%
16.5%
7.5%
0.9%
14.9%
Sha res
17.4%
17.5%
13.4%
6.2%
0.9%
12.3%
Inves tment Funds + FICE
3.4%
3.4%
3.1%
1.3%
0.0%
2.6%
Fixed Income
9.1%
28.1%
46.7%
70.1%
96.7%
46.4%
Government Securi ties
3.2%
13.4%
20.5%
33.4%
46.9%
21.4%
Pri va te Sector
4.4%
11.5%
22.8%
28.5%
27.2%
19.0%
Ti me Depos i ts
1.5%
3.1%
3.3%
8.1%
22.5%
5.9%
Mutua l & Inves tment Funds
0.0%
1.0%
0.1%
0.1%
0.0%
0.1%
Deri va tives
0.2%
0.1%
0.1%
0.0%
0.1%
0.1%
Foreign Assets
69.9%
50.8%
36.6%
22.3%
2.4%
38.5%
Equity Instruments
58.4%
38.1%
21.8%
10.4%
1.7%
26.7%
Mutua l funds /ETFs
43.1%
26.8%
12.8%
4.4%
0.3%
17.6%
Other As s ets
15.3%
11.3%
9.0%
6.0%
1.4%
9.1%
Fixed Income
11.4%
12.7%
14.3%
11.9%
0.7%
11.6%
1.0%
0.0%
0.1%
0.0%
0.0%
0.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Deri va tives
TOTAL ASSETS
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Chile – Features of the Multifondos System
Real Returns by Fund Type
- Note inverse risk/return results for 2010-2012
Pension Fund Type
For 2012
Type A - Most Risky
6.06%
Type B - Risky
4.88%
Type C - Intermediate
4.61%
Type D - Conservative
3.81%
Type E - Most Conservative
3.51%
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Annual
Annual
Average 3
Average
years, 2010- Sept 2002 2012
end-2012
1.71%
6.74%
2.60%
5.72%
3.24%
5.09%
3.61%
4.59%
4.73%
3.87%
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Colombia – Features of the Multifondos System
Share of System Assets, end-2012
Retiro Programdo
6%
Conservador
5%
Mayor Riesgo
1%
Voluntarios
10%
Moderado
78%
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Colombia – Features of the Multifondos System
Portfolio Distribution by Fund type, end-2012
Domestic Assets
Mayor
Retiro
Moderado Conservador Riesgo Programado Voluntarios
81.6%
88.4%
67.2%
90.7%
76.1%
Dom. Gov. Debt
Dom. Private Debt
Dom. Shares
Dom. Mutual & Inv. Funds
38.0%
8.2%
32.1%
3.3%
51.9%
23.9%
12.5%
0.1%
26.6%
2.2%
38.4%
2.9%
53.7%
23.7%
12.1%
1.5%
22.0%
35.8%
15.9%
1.2%
Foreign Assets
14.6%
Foreign Gov. Debt
1.5%
Foreign Private Debt
0.0%
Foreign Shares
2.5%
Foreign Mutual & Inv. Funds 10.6%
7.8%
0.1%
0.5%
1.3%
5.9%
27.3%
0.6%
0.0%
4.4%
22.3%
7.4%
0.5%
0.1%
1.3%
5.4%
9.3%
0.1%
1.3%
2.2%
5.7%
0.0%
3.7%
0.1%
100.0%
0.0%
5.0%
0.5%
100.0%
0.0%
1.9%
0.0%
100.0%
1.5%
11.0%
2.1%
100.0%
Structured Products
Cash
Derivatives (Net)
Totals:
1.5%
2.1%
0.2%
100.0%
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Colombia – Features of the Multifondos System
Returns by Fund type, end-2012
System just 2 years’ old by August 2013
Regulator permits publication of only rolling 48-month returns
Colombia - Returns illustrations
Compound annual average changes, by period
Fondos Retiro
Fondos Moderados
Fondos Conservador
Programado
August August
August
August
2011 2011 June 2009-June from Inception May 2011 2011 June
June
2013
1994-June 2013 June 2013 June 2013
2013
2013
Nominal Real Nominal
Real Nominal
Real
Nominal
Real
Weighted Average,
all Funds in
Category
10.81%
7.90%
13.62%
4.73%
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6.11%
3.17%
6.55%
3.59%
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Mexico – Features of the Multifondos System
Share of System Assets and Returns, end-2012
Fund Type
Dec-10
Dec-11
Dec-12
Siefore Type 1 Conservative
10.08%
8.37%
13.07%
Siefore Type 2 Moderate
12.30%
7.09%
14.42%
Siefore Type 3 Intermediate
13.49%
6.65%
16.01%
Siefore Type 4 High Risk
15.20%
6.07%
18.09%
Siefore Type 5 Transitioning to Type 4
15.90%
6.59%
-
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Mexico – Features of the Multifondos System
Portfolio Distribution by Fund type, end-2012
Asset Categories
Siefore 1
Siefore 2
Siefore 3
Siefore 4
Siefore 5
Domestic Assets
Domestic EquitiesDomestic Fixed Income
95%
2%
98%
83%
9%
91%
80%
12%
88%
76%
16%
84%
86%
5%
95%
Foreign Assets
Foreign Equities
Foreign Fixed Income
5%
36%
64%
13%
84%
16%
15%
85%
15%
19%
89%
11%
9%
82%
18%
Alternatives
PE/VC
Real Estate
0%
0%
3%
100%
0%
4%
100%
0%
4%
100%
0%
5%
100%
0%
Total Assets
100%
100%
100%
100%
100%
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Peru – Features of the Multifondos System
Share of System Assets and Nominal Returns end-2012
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Peru – Features of the Multifondos System
Portfolio Distribution by Asset & Fund type, end-2012
2012
Domestic Assets
Type 1 Type 2 Type 3
Fund % Fund % Fund %
79.2
70.5
64.6
Government
Government Bonds
Financial System
CDs
Debt issued by Intl Organizations
Debt issued by Intl Financing
Equities
Non Financial
Private Bonds
Equities
Investment Funds
Other
25.6
16.1
24.7
9.4
1.1
0.4
0.7
21.5
13.9
5.5
0.8
6.6
20.1
17.4
16.3
3.3
0.6
0.6
5.7
23.9
5.7
16.7
4.3
6.0
4.2
4.1
14.3
3.2
0.2
0.1
8.6
40.3
1.4
38.8
3.8
2.0
Foreign Assets
20.4
29.3
35.0
2.0
4.6
3.5
0.1
4.8
4.1
0.7
9.0
0.5
100.0
1.8
2.7
2.3
0.2
5.8
2.6
3.2
18.9
0.2
100.0
1.3
1.8
1.4
0.3
9.6
1.4
8.3
22.3
0.4
100.0
Government Bonds
Financial System
Bonds
Equities
Non Financial
Bonds
Equities
Investment Funds
Other
TOTAL
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28
LatAm Pension Funds & Alternative Assets –
Permitted Exposures
Real
Foreign
Estate currencies Commodities
Equity Infrastructure
Bolivia
No
No
No
No Rule
Brazil
Yes
via Funds/ETFs
Yes
via Funds
Chile
Yes
via Funds/ETFs No Rule
No Rule
Colombia
No
via Funds/ETFs via Funds
No Rule
Costa Rica
No
No
No
via Trusts
Dominican Rep.
No
No
No
via Trusts
El Salvador
No
No
No
via Trusts
Mexico
Yes
Yes
Yes
CKDs/FIBRAs
Panama
No
No
No
via Trusts
Peru
Yes
Yes
Yes
No Rule
Uruguay
No
No
No
via Trusts
No Rule means sector exposure isn't covered by an investment regulation
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P/E Domestic
Yes
Yes
Yes
Yes
Yes
No Rule
No Rule
Yes
No Rule
Yes
Yes
P/E Foreign
Yes
Yes
Yes
Yes
No
No
No
Yes
No Rule
Yes
No
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Typical Requirements for Qualifying Investments
Summary of Typical Requirements for Qualifying Investments,
e.g.:
 Credit Ratings -Investment Grade
 Risk Ratings
 Qualified Investment Management Companies (Managers’
experience, operating histories, AuM minimums, others)
 Exposure Limits by asset classes, instruments, issuers,
management companies, currencies,
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LatAm Pension Fund Investment - Private Equity
Country
Pension Funds
Assets (USD)
% Assets Permitted for Private Equity
Notes
Brazil
Petros (Petrobras)
FUNCEF (Caixa Económica Federal)
Postalis
Previ (Banco do Brasil)
Forluz
$300 billion
Since 1997, pension funds can invest up
to 20% of their assets in structured
vehicles including PE funds. 2009 law
permits investment abroad of up to 10%
of capital, but most invest only in Brazil
Chile
AFP Provida
AFP Capital
AFP PlanVital
$168 billion
AUM of which
$4bn in PE
Since 2002, pension funds have been
permited to invest up to 2.5% of assets
in PE funds. They can invest in local and
international funds.
Source: The Guide to Latin America
Pensions, ABRAPP as of December
2012. Pension funds listed are largest
5, but there are over 300 closed
pension funds, and the top 20 have
significant allocations in private
equity.
Source: The Guide to Latin America
Pensions, Superintendencia de
Pensiones. as of December 2012. All
pension funds are included in the list.
Colombia
AFP Horizonte BBVA AFP ING
AFP Protección
AFP Skandia
AFP Colfondos
AFP Porvenir
AFP Conseguros
AFP Abierto Union
$79 billion
AUM of which
$2bn in PE
Since 2008, pension funds can invest 10%
of assets in PE funds (5% local and 5%
global). They can invest in international
funds if the fund manager has at least $1
billion assets under management.
Source: The Guide to Latin America
Pensions ASOFONDOS. Data as of
December 2012. All pension funds are
included in the list.
Mexico
Afore Banamex Afore Sura
Afore Profuturo Afore MetLife
Afore Principal Afore InverCap
Afore Coppel
Afore Bancomer
$144 billion
AUM of which
$5bn in PE
Since 2009, pension funds (AFORES) can
invest in PE funds, but only through
publicly listed “development capital stock
certificates” (CKDs). They can invest 13%
of assets in CKDs, which can finance
projects, REITS, and 7% in PE funds.
Afores can invest abroad as of 2012
Source: The Guide to Latin America,
CONSAR. Data as of Dec 2012. The
Afores listed are those that have
invested in PE. There are 12 Afores
total.
$37 billion
Since 2008, can invest in PE funds. As of
December 2012, the cap is 3.0% of assets
for all alternative investments including
PE. They can invest in local and
international funds.
Source: The Guide to Latin America,
Asociación de AFPs. Data as of July
2012. All pension funds are included
in the list.
Afore Azteca
AFP Habitat
AFP Cuprum
Total AUM
Of which
$7 bn in
PE/VC
Structured
Afore XXI
Pension ISSSTE
Peru
AFP Horizonte (BBVA)
AFP Integra (ING)
AFP Prima (Grupo Credito)
AFP Profuturo (ScoTaBank)
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Brazil Domestic Institutional Investors surpassed Foreign
Investors Commitments in PE in 2012
(Source: abvcap and KPMG)
54%
49%
46%
51%
Total
Investments
2011-R$11.8 bn
2012-R$14.9 bn
Investor Category - Percent of Capital Commitments in PE
2011
2012
Pension Funds
Domestic Institutioan Investors
Family Offices
GP Resources
Intl Institutional Investors
Other International
Other
Total
12%
9%
9%
13%
30%
23%
4%
100%
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16%
12%
8%
12%
27%
20%
5%
100%
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Brazil – Private Equity Total Investments by Sector (%)
(Source: abvcap and KPMG)
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-
2008
2009
2010
2,402
2,312
Infraestructura Institucional
PROMECAP
2011
2012
PLA Administradora Industrial
Asesor de Activos PRISMA
1,350
1,218
2,045
Macquarie México Real Estate Managment
479
Pine Bridge
2,369
477
Northgate Capital
Fibra Hotelera Mexicana
537
Grupo Bursatil Mexicano
2,450
Planigrupo Management
585
2,726
Axis Capital Management
LATIN IDEA
2,683
4,342
Finsa Real Estate Managment
Credit Suisse
GRUPO MRP
461
495
1,305
1,588
1,663
772
13,658
CKDs +
FIBRAs
Fibra Uno Administración
Grupo Inmobiliario MEXIGS 3
Grupo Inmobiliario MEXIGS 3
Capital Inmobiliario
EMX Capital
Vertex Real Estate
MARHNOS
4,977
2,481
AMB Mexico Manager
1,514
2,826
PLA Inmuebles Industriales
Artha Operadora
2,949
Nexxus Capital IV General Partner
3,841
1,130
Atlas Discovery México
8,000
NAVIX
1,325
2,000
WAMEX Capital
3,292
16,000
MACQUARIE
12,000
10,141
14,000
Red de Carreteras de Occidente
4,000
2,549
6,000
Agropecuaria Santa Genoveva
Mexico - Evolution of the Investments in CKDs
and FIBRAS
TOTAL US$6,829 mn
10,000
2013
Source: CONSAR April 2013
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Mexico – There is plenty of room to invest in
CKDs and FIBRAS
Capacity for CKDs focused
on private equity and other
projects:
Capacity for CKDs and FIBRAS
focused on infrastructure,
housing and real estate:
US$13,783 mn
Net Asset
Total of
US$ 8239 mn
Consumption Available
Net Asset
Total of
S1
137,687
Limit
-
S2
621,527
S3
S4
Limit
S1
137,687
-
-
-
S2
621,527
62,153
16,603
45,550
S3
649,593
84,447
23,754
60,693
S4
635,992
82,679
21,514
61,165
2,044,799
229,279
61,871
167,408
Total
Complementa
Total
Consumption Available
-
-
31,076
5,026
26,050
649,593
45,472
8,077
37,394
635,992
44,519
7,894
36,625
2,044,799
121,067
20,997
100,070
Complementa
ry
ry
Savings
Savings
Source: CONSAR. April 2013. Exchange rate: 12.15 MXN/USD.
*
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Mexico – Losts of capacity vs Regulatory Limits
For CKDs and FIBRAS
focused on infrastructure,
housing and real estate
For CKDs focused on private
equity and others
projects
T h e challenges to the AFORE are to find relatively-secured and profitable
projects and more sophisticated tools to analyze them.
Source: Consar April 2013
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Mexico – Pensions’ Holdings in CKD and FIBRAS
Total Local
Cy. mn
AFORE Holdings
CKDs
69,204
90.0%
FIBRAs
100,987
20.4%
IPO
109,688
13.8%
Instrument
Source: Consar April 2013.
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Other Exposures to Alternative Investments
 Brazil, Peru, Mexico – listed companies provide heavy exposure to
many types of commodities (oil, precious & base metals,
agricultural) and infrastructure assets (power, telecoms)
 Colombia – Commodity funds and Commodity index-linked ETFs
were almost 2% of total assets end-2012
 Chile, Colombia – Emerging Stock Market exposures via ETFs
represent almost half of all non-domestic stock market investments
 Infrastructure (power generation, ports/airports)& Housing via
Trust Fund bond issues – recent public-private project funding
innovations in Uruguay, Costa Rica, Panama, Dominican Republic &
El Salvador
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LatAm Pension Funds’ Portfolios – Current Trends
 Greater permitted diversification among asset classes (especially to
alternatives and foreign assets); AND
 Growing actual investment in alternatives and foreign assets, as
more attractive opportunities appear (domestic public-private
infrastructure projects; domestic & foreign PE Fund options; rising
foreign interest rates & improved foreign equities and currency
outlooks).
Remember – most LatAm currencies were appreciating vs. the USD
throughout the 2000s; their domestic interest rates & yields were
higher than foreign credits; and most foreign credit & risk ratings &
stock markets were deteriorating, at least from 2008.
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LatAm Pension Funds’ Systems
A Look Forward
 Brazil adding a Federal employees’ Variable DC plan – likely to be
huge in a few years’ time;
 Public demand for reduced costs and better returns/pension
payouts by plan participants in mandatory DC plans likely to result in
system changes;
 Region’s good demographics for retirement assets accumulation and
historically highly profitable asset management fees bringing in
competition – new AFPs & owners (in 2013 - Peru– AFP Habitat;
Grupo Sura, Principal Financial Group, MetLife & Scotiabank to
several markets 2013);
 Possible Policy/Political Backlashes – Bolivia (abolition of AFPs
underway), Chile (presidential elections 11-2013), Uruguay (‘optout’ option under discussions).
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Summing Up….
 Funded PFs in LatAm are large, institutionally diverse, & manage increasingly
diversified investment portfolios
 Investment barriers & buffers - are being loosened
 Strong favorable secular trends – region’s generally young demographics
and trends to formalization of their economies ensures high levels of savings
contributions & PFs’ asset growth
 new business opportunities & partnering - PFs’ growing asset
diversification will require working with experienced money managers and
financial service providers of all types = new business opportunities
 new competitors - Large & growing asset bases & high historical profitability
by PFs’ asset administrators are attracting new multinational competitors
(taking over existing AFP’s business, or as licensed start-ups), looking for new
ways to do business
 Consumer dissatisfaction – Get ready for Change Affiliates frequently feel
overcharged grossly and then have seen their ‘multifondo Agresivo’ returns well
below that earned by the Conservador funds – for years, in some recent cases.
Yet, the AFPs make good money. Mandatory participation and/or contributions
systems are in question.
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To close, a little about us …
 About Campollo Consulting LLC – Campollo Consulting LLC, a minority owned firm, was established by
Carmen Campollo. Over the past 20 years Carmen has worked for firms such as the World Bank,
International Finance Corporation, Standard & Poor's, FTSE and Russell Investments. In addition to the
Guide to Latin America Pension Funds, Investment Context and Regulations, Campollo Consulting has
developed a data base for 11 Latin American countries, including a 6 year history of asset allocation across
23 categories for over 400 pension funds. In addition Campollo Consulting created a methodology for
manager searches, Fund of Funds, designed and developed indexed portfolios and financial investment
products. You can learn more about Campollo Consulting at www.campolloconsulting.com. Contact us at
1-800-871-9012 ext 281782 or: carmen@campolloconsulting.com; info@campolloconsulting.com
 Wall’s Street Advisor Services LLC (WSAS) specializes in innovations in financial information services for
investors and researchers interested in emerging markets and socially responsible investing. Founder and
CEO Peter Wall has over 30 years’ experience in developing and marketing financial information services,
with International Finance Corporation (IFC), FTSE International, and Microfinance Information Exchange,
Inc. (MIX), as well as in his own capacity. Besides his contributions to The Guide to Latin America Pension
Funds, he is the creator & compiler of the WSAS MFI Shareholder Value Index series. More can be seen
about WSAS at www.wallsstreetadvisorservices.com
The information and materials presented in this document have been prepared solely for informational purposes based upon information generally
available to the public from sources believed to be reliable. The authors of this document disclaim any and all liability relating to these materials and make
no express or implied representations or warranties concerning the accuracy or completeness of the document, the content of which may change without
notice. Nothing in this document is intended to be or should be construed to be legal advice or investment advice.
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