LIMA — With the prospects for additional allocations from Chilean AFPs fading fast, international mutual fund managers have flocked to neighboring Peru's privatized pension managers to grab a piece of their growing assets.
The four-fund, $6.8 billion Peruvian system pales next to Chile's $49 billion, but it is growing at a 20% annual clip, and international managers are betting that overseas investment limits are ripe for an increase from their current 10.5%; the AFPs already invest 9.5% of their combined assets outside Peru.
The Central Bank has the power to raise the limit to 20%, the maximum authorized by law, but has insisted so far that an increase is not on its agenda.
Nevertheless, reforms to be instituted shortly by the pension regulator, the Superintendencia de Banca y Seguros — which include the breakout of each AFP's portfolio into three funds with different risk levels — portend a much higher demand for international investment. The local equities market is too small to absorb major capital inflows from the AFPs, according to AFP managers. (Each AFP now offers a single conservative portfolio with a mix of stocks and bonds.)