Mexico’s pension regulator has increased the number of investible countries available to the Afores and officially outlined what type of mutual funds they can now hold.
In a pre-Christmas statement, Consar (Comisón Nacional del Sistema de Ahorro para el Retiro) said it would allow Mexico’s pension funds to invest in mutual funds as part of its efforts to expand their investment universe and boost their returns starting January 2018.
In new regulatory rules released on January 5, the regulator stated the Afores can invest in mutual funds that hold a wide range of securities, including equities, fixed income, credit, hybrid vehicles such as convertible bonds, as well as structured products.
All the mutual funds must be registered and invest in at least one of the markets listed among the regulator's eligible countries (see full list below).
This approved list of countries includes Luxembourg and Ireland, opening up the realm of Ucits-compliant vehicles to the countries 11 Afores that together run over $160 billion in assets.
Among the reasons for the change, said the regualtor, was that it would allow the smaller-sized Afores to gain access to active strategies similar to the more costly international investment mandates used by the larger pension funds.
The debt vehicles will have certain limitations regarding debt quality as set out by the regulator's risk analysis committee and the mutual funds will also need to offer daily liquidity, or meet the liquidity demands of the committee.
Until last month, the Afores’ international market exposure had been limited to segregated investment mandates and a limited number of authorized ETFs and stocks.
The eligible countries Consar outlined include:
- All 28 members of the European Union, as well as Switzerland, Iceland and Norway
- Australia, India, Hong Kong, Singapour, South Korea, China and Israel
- Brazil, Chile, Colombia and Peru
Among the latest additions to the list are Malaysia, South Africa, New Zealand, Thailand and Taiwan.