MEXICO CITY — There'll be no Chilean-style asset-gathering fiesta for fund firms when Mexico's privatized pension managers, known as Administradoras de Fondos para el Retiro, or Afores, get their first crack at international markets in December.
Earlier this month, the board of governors of the Comisi%F3;n Nacional del Sistema del Ahorro para el Retiro, or Consar, which oversees the pension system, took its long-awaited vote to approve three decisive measures: to allow the funds that make up the $40 billion system to diversify portfolios outside Mexico; to permit for the first time allocations in equity-linked vehicles; and to split each pension manager's current one-size-fits-all investment fund into two separate funds with different risk-return criteria.
With the vote, the Consar's executives got the go-ahead to begin drawing up the specifics for the transformation of the system, which the agency predicts will take until year end.
Mexico's legislature voted in late 2002 to allow the Consar's board to consider international in the allocation mix. That vote came after the implosion of the Argentine system, which was heavily exposed to local government debt when the country defaulted on its obligations in late 2001.
As for equity investing, this possibility had been open to the board for some years, but board members representing union interests had been opposed to the idea given the high volatility of Mexico's stock market.
But despite the opening into new markets and asset classes, the Consar's initial approach was deemed conservative by industry observers: it allows domestic and international equity investment only in principal-protected notes that are, in turn, linked to a range of global indexes. On the bond side, only notes rated A- or better can be used.