Andean Special Report: AFP Growth Outstrips Market

Sep 1, 2008

Peru’s private pension funds are growing as fast as the country’s roaring economy. A dearth of investment opportunity holds them back and new products and regulatory change are needed.


by Ben Miller

As LatAm asset holdings go, the $22 billion that Peru’s four private pension funds (AFPs) control may not challenge Chile ($100 billion) or Mexico ($83 billion). But these growing investors rake in about $3 billion per year, according to AFP Integra, and represent 18% of the county’s GDP. And they are still too much for the domestic market to handle.

“Private pension funds are the biggest investor in Peru’s domestic markets, but the problem is that they are growing more than the markets,” says Gonzalo de las Casas, CIO at Integra, the largest AFP, with $7.15 billion equivalent under management as of June. AFPs need to be able to better re-invest all of the funds they are accumulating. De las Casas says the solution would largely come from regulatory change and an increase in domestic investment opportunity.

Despite Peru’s spectacular growth, elevation to investment-grade and heightened interest...

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