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Chilean AFPs' active equity allocation soared in 2017

Chilean AFPs' active equity allocation soared in 2017

Chilean pension funds’ allocation to foreign equity mutual funds surged to $47.4 billion in December 2017 from $28.3 billion a year earlier as new investment in ETFs dipped.

Foreign equity mutual funds made up 22.5% of the AFPs total assets as of December compared to 16.2% a year earlier, according to data from the pensions regulator Superintendencia de Pensiones.

The Superintendencia latest figures do not distinguish new investment from market appreciation, as it has yet to publish its flows report for the fourth quarter, which is expected to be released by March.

However, figures as of September 30 support the trend of AFPs pumping billions into the fund cataegory for most of the year.

The AFPs invested a net $242 million into the asset class in the first quarter of the year, $2.3 billion in the second and $3.4 billion in the third.

These flows helped bring the AFP’s total allocation to foreign equity mutual funds to $40.8 billion or 20.3% of total assets as of September 30, up from $29.5 billion or 16.9% a year before, according to data from the Superintendencia.

The AFPs had withdrawn more than $1.3 billion net from foreign equity mutual funds in the third quarter of 2016 and $393 million in the fourth, according to data from Chilean pension regulator Superintendencia de Pensiones.

Despite last year’s positive flows, market appreciation also explains asset growth, a spokesperson for the agency said. Equities around the world rallied in the past 12 months, with the Nasdaq Global Index rising more than 22%.

Foreign debt mutual funds didn’t enjoy the same popularity as their equity counterparts in the year ending September, as they received negative flows from the AFPs in all but the third quarter of 2017.

As of September 30, these funds made up 10.4% of the pension funds’ portfolios, a slight dip from their 11.5% share a year before.

ETFs also recorded a mixed run, as they only received positive flows in the last quarter of 2016 and the first of 2017.

In the year ending September, the AFPs showed almost no interest in bond ETFs, with the first quarter of last year recording negative flows of $199 million and the second and third a net investment of zero. 

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