Snapshot: Where Chile's AFPs are investing

Chile’s private pension fund system is recovering following a turbulent start to the year that saw assets under management (AUM) battered by financial market turmoil whipped up by the coronavirus pandemic.

AUM stood at US$197bn at the end of May, reflecting a partial recovery.

At the end of January, the companies were managing US$215bn, according to data from pension watchdog SP.

AUM hit a 2020 nadir of US$171bn at the end of April as higher-risk assets took a battering.

Amid the market turbulence, the number of pension savers switching between risk-based funds within the same AFP has rocketed.

In April, the country's seven AFPs registered a total of 833,491 movements, the second highest tally on record after the 897,292 registered in March. In April, 95% corresponded to movements within the same AFP, Ciedess, the social security research unit of Chilean construction chamber CChC, said in a report. 

Medium-risk fund C and high-risk fund A saw the biggest number of net inflows in April, accounting for 335,991 and 105,110, respectively. Low-risk fund E saw the biggest net outflow, of 404,273, contrasting sharply with the net inflow of 170,569 seen in March.

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Against the backdrop, as part of efforts to support returns and portfolio diversification, the government has proposed giving the central bank scope to raise to 20% the upper limit on the proportion of AUM that the AFPs can invest in alternative assets. Under the existing legal framework, the central bank decides how much of each risk-based fund AFPs can invest in alternative assets. Currently, this can range from 5-15%.

Following other regulatory changes, AFPs can now invest indirectly in SME assets and invest in gold certificates.

Also, over the period quarters of the opposition tried to start a process of nationalizing system assets. Plus, a court said a retired teacher could withdraw her pension savings, a move that could be challenged by respondent AFP Cuprum in the higher courts.

WHERE AFPs INVEST (to May 2020)

Where Chile's AFPs invest saver funds, through May 2020. BNamericas with SP data.