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Chile AFPs int’l portfolios hit by near $3bn loss

Chile AFPs int’l portfolios hit by near $3bn loss

Chilean pension funds were hit hard by the February market drop as it wiped close to $3 billion in value off their international mutual fund portfolios.

The market depreciation led to a $2.98 billion drop in the assets Chile's AFPs allocate to international mutual funds, according to HMC's head of distribution Nicolás Fonseca.

Their allocation dropped by a further $343 million last month due to net withdrawals from US equities and money market funds, added Fonseca, bringing the overall drop to over $3.3 billion.

However, amid the generalized market drop the AFPs continued to bet on emerging markets in February. They poured a net $1.4 billion into emerging market equities last month, according to a report by Chile-based financial firm HMC Capital.

This included $726 million in Asia, $296.6 million in Latin America, $292.8 million in Brazil and $133.3 million into Eastern Europe, the data show. These net inflows last month more than offset the AFPs' net withdrawal of $164.9 million from global emerging market equity funds.

Meanwhile, emerging market debt garnered $378.3 million in February, which pushed AFP holdings in the asset class to roughly $11.8 billion, according to the report. 

Between debt and equities, emerging markets accounted for $44.7 billion of the AFPs' $83.9 billion allocation to international mutual funds as of the end of February. Asian equities alone represented 50% of the AFPs' total investment in emerging markets through foreign funds, the data show. 

The inflows into emerging markets occurred as the AFPs pulled a net $807.4 million from US equities, continuing their retreat from the sector which they initiated around May last year.

In the first two months of 2018 only, the pension funds took out close to $1.9 billion net from US equities, reducing their holdings in the segment through international mutual funds to $6.4 billion. 

Favored funds 

In February, the equity funds receiving the most inflows were iShares MSCI Brazil with $292.8 million, the Aberdeen Latin American Equity with $223.9 million and the Investec Asian Equity fund with $188.8 million. 

For fixed income, the most popular funds were the GAM Local Emerging Bond fund with $201 million in net inflows, the BlackRock Emerging Markets Local Currency Bond Fund with $135.4 million and the Ashmore Emerging Markets Local Currency Bond fund with $90.4 million.

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