September 25, 2013
By Katie Llanos-SmallIf 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 shuddered.
The Type E funds — which, by regulatory design, must invest the bulk of their
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