Afore Principal profits surge 288% to US$16mn

Mexico's ninth largest pension fund manager Afore Principal reported profits of 182mn pesos (US$16mn today) for the first nine months of the year, a 288% increase from 46.9mn pesos in the year-ago period, according to statistics on regulator Consar's website. Mexico adopted a private pension system in 1997 to replace the state-funded system managed by social security agency IMSS. Under the model, salaried workers contribute 6.5% of their gross wage to pension fund managers, or Afores, which then invest that money through special investment vehicles called Siefores. Assets under management at Siefore Principal grew 68.7% in the first nine months year-on-year to 16.7bn pesos, while profits were up 82.6% at 1.17bn pesos. Siefore Principal closed September with a 4.3% share of the 392bn pesos in assets under management at the country's 12 Afores. Afore Principal's client base grew 45.5% year-over-year to 3.2 million affiliates. The company had a 10.2% market share of the 30.7 million Mexican workers affiliated with an Afore. About 1.4 million or 43.8% of clients were directly affiliated with the company, while the other 1.8 million were accounts assigned to Principal by the regulator. These accounts frequently belong to individuals without a permanent address or who make sporadic contributions because of an unstable employment history, which Consar assigns to the Afores with the lowest commission structures. Afore Principal is the fourth most expensive pension fund manager in terms of commissions, with an average commission calculated at 0.83% over a 25-year period assuming a real return of 5%. The average commission for the industry is 0.84%. US-based Principal financial group controls Afore Principal as well as insurance and voluntary pension savings subsidiaries in Mexico.