BUENOS AIRES - Consolidation already is occurring in Argentina's private pension system, which is not yet three years old.
April saw the latest reduction in the number of pension fund administrators, known as AFJPs, as Maxima S.A. AFJP, bought Patrimonio AFJP; both firms are in Buenos Aires.
According to Hector Gonzalez Gale, managing consultant in the Buenos Aires office of Watson Wyatt Worldwide, Maxima paid $136 million to buy Patrimonio. At the end of February, Maxima managed 975 million pesos (about U.S. $975 million) of Argentine pension assets, whereas Patrimonio's share was about 92 million pesos, said Mr. Gonzales Gale.
The number of Argentine AFJPs has been declining sharply recently. According to Peter Mills, Latin American regional consultant in Miami for Watson Wyatt, the number has fallen to about 20, from more than 30 at the end of 1994, some six months after the new system began. Most of the shrinkage occurred as a result of larger AFJPs acquiring smaller ones.
Naturally, the winners have been those that have attracted the most assets. According to Mr. Mills, there now are 13 AFJPs managing more than 100 million Argentine pesos, while the rest tend to have significantly smaller shares.
However, industry consolidation might be winding down. Although a few more AFJP acquisitions are expected, the number of players "is getting close to where some people think they should be, which is about 15," said Mr. Mills. Currently, assets in Argentina's private pension system total about 6 billion Argentine pesos.
And some of those assets probably will start flowing again to local mutual funds, after a six-month break.
In a separate development, a rule that had brought Argentine pension allocations to mutual funds almost to a halt, has been eased. That easing is a victory for foreign money managers in Argentina.
Under an agreement reached this month, mutual fund prospectuses do not have to specifically prohibit investments in unrated securities as long as internal policy documents specify targeted markets, instruments and acceptable levels of risk.
The agreement between the regulatory bodies controlling the two industries - the Comision Nacional de Valores for the mutual funds and the Superintendencia de Administradoras de Fondos de Pension for the pension funds - created an escape route to a regulation enacted last October.
The SAFJP had imposed the original regulation to confront the wide investment flexibility granted by mutual fund prospectuses, fearing pension assets eventually would wind up being invested in securities or markets now off-limits to pension funds.
Only one of 150 active mutual fund prospectuses expressly prohibited investment in unrated instruments, and so allocations to mutual funds, which at times reached $100 million, came to a virtual standstill.
The regulation also stepped on the toes of institutional managers - such as Schroders, INVESCO, Templeton Worldwide Inc. and SEI Corp. - that had launched or considered launching specialized products for the pension fund market that often contained unrated instruments.
However, after some pressure from both sides, the SAFJP agreed to accept copies of mutual funds' internal investment policies as a substitute for a 100%-rated portfolio, given that the policy contains specific information about markets and instruments targeted and the level of risk the fund will assume.
The decision frees mutual fund companies to launch a new wave of products aimed at enhancing pension fund diversification.
