Latin America preparing for aging population
Latin American pension funds are preparing to face an aging population dependent on funding from fewer workers in the coming years. The old-age dependency ratio* for Latin America and the Caribbean is expected to be 13.4 in 2020 and will grow to 29.7 by 2050. That metric in the U.S., for comparison, is expected to be 28.4 next year, and 40.4 in 2050.
To meet the upcoming demand on their pension benefits, pension fund managers in the region have increasingly warmed to alternatives and foreign investment. Some larger counties in the region hold foreign investments well below their allowed maximums.
Additionally, investments in alternatives, particularly and not surprising, private equity, are expected to increase. Alternative investments were estimated at $254.1 billion at the end of 2018 and are expected to grow about 13% annually to $590 billion by 2025. Private equity assets are expected to be at $173 billion in 2025, up from $70 billion in 2018. Infrastructure investment, a key area for economic growth, is expected to more than triple over that period to $146 billion by 2025 from $40.3 billion in 2018.
* Percentage of people over 65 to all adults over 20.