SANTIAGO - AFP Magister, one of Chile's seven privatized pension funds, is likely to be sold amid a corruption scandal involving its parent, Inverlink Holding de Inversiones SA and Inverlink Capitales SA.
On March 21, Judge Gloria Sol¡s of the 10th Criminal Court reviewed a forced bankruptcy request against Inverlink, effectively freezing all assets of the group. Pending acceptance of the request, Judge Sol¡s will name a trustee, and assets of Inverlink - which include insurance, mutual fund, brokerage and health-care companies as well as the pension manager - will be liquidated.
The pension manager is the smallest of Chile's US$34.8 billion industry. As of Feb. 28, it had $920.7 million in assets, of which $101 million was invested in international mutual funds.
While Magister executives acknowledged having met various Chilean managers regarding a potential sale, that task would fall to a court-appointed trustee if the holding company is forced into bankruptcy and liquidated.
AFP Planvital, the second-smallest pension manager with $943.4 million in assets under management, is rumored to have held various meetings with Magister executives on a potential purchase.
AFP Magister is considered among the healthiest of Inverlink's holdings and has not been tied to the scandal, which began when authorities discovered an administrative worker in Chile's Central Bank allegedly had forwarded e-mails and other confidential information to an Inverlink executive. Later, it was revealed the money desk operator of the Chilean Economic Development Agency, known as Corfo, had used Inverlink to channel into the marketplace an estimated US$106 million in stolen agency notes.
Many of the pilfered Corfo notes wound up in the portfolios of local pension and mutual funds. AFPs Cuprum, Habitat and Provida were found to be holding a total of US$3 million in Corfo notes, all purchased in the secondary market, as required by law. (Both the AFPs and mutual funds are considered legitimate owners of the Corfo notes because they bought the notes in good faith on a secondary market, noted Guillermo Arthur, president of the pension fund association.)
Avoiding the storm
AFP Magister was able to steer clear of the storm surrounding Inverlink, mostly because of the strict trading controls placed on the country's AFPs to limit conflicts of interest. Alejandro Ferreiro, who heads Chile' s regulatory agency, the Superintendencia of Administradoras de Fondos de Pensi¢n, lauded Magister for resisting pressure from Inverlink's brokerage unit to add Corfo paper to its portfolio and for choosing to trade through non-affiliated companies.
"We have very rigorous permanent controls," noted Luis D¡az, Magister's assistant investment manager.