By Katie Llanos-Small
Andean pensions: Power to the people
Expanding much faster than GDP, retirement funds in Chile, Colombia and Peru have reached a size that makes them major movers of domestic markets. Regulators are starting to take notice
If ever proof was needed that past performance is no guide to
future returns, the performance of Chile’s pension
funds provides it.
Yields on the most aggressive investment funds have
plummeted. And when Chileans woke up to the fact that the most
conservative pension fund buckets had also become the best
performers, they did the logical thing and switched their
savings. Pension savers moved 5.5 trillion pesos ($10 billion)
into the safest allocation strategies, known as Type E buckets.
The size of these funds doubled in little more than a year.
In response, Chile’s local markets
The Type E funds — which, by regulatory design,
must invest the bulk of their assets in government securities
— struggled to deploy the incoming cash. Yields there
fell and those already subscribed to the Type E funds
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