Afore managers to start investing in mutual funds

Mexico's pension fund managers, known as Afores, are set to begin investing in mutual funds in the second half of 2018, according to local association Amafore.

Speaking at the LatinFinance 13^th Mexican Financial Summit, held in media partnership with BNamericas, Amafore president Carlos Noriega said mutual funds add to the diversity of investing options, while complementing investment portfolios both for those Afores that make use of investment mandates and as a useful substitute for those that do not.

Mexico opened the door to investment mandates for Afore fund managers in 2011, with the first funds beginning to utilize the mandates in 2013; however, only larger Afore funds have participated so far, including Citibanamex, XXI Banorte and Sura.

Mexico's retirement authority (Consar) recently announced investment in mutual funds would be permitted by Afore managers; however, additional regulations have yet to be published.

"[Allowing] mutual funds has become a very important step, because all Afores are now going to have the possibility to invest in an active and very specialized way," said Noriega. "The smaller Afores will have to be very skillful to take advantage of and manage [the mutual fund investments] in order for this instrument to work."

Noriega said that the authorities have reviewed different options, and he is confident that this tertiary regulation will be very stimulating in yielding greater profitability to the savings investment.

"I calculate that in the second half of the year we will be seeing the first ones investing in mutual funds; the mandates took more than four years, the funds ought to take months," said Noriega.

At the same Summit, Roque Calleja, director and head of ICB for Mexico at BlackRock, added the mandates have been very timely for the investment of the Afores. From 2013 to date, between US$7bn and US$8bn have been allocated in investment mandates, he said.