After the fall of the stock markets in the world due to the financial uncertainty generated by the collapse of the Silicon Valley Bank, the President Gustavo Petro asked the administrations of the private pension funds, that is, Porvenir, Protección, Colfondos and Skandia “to bring pension savings to the country”.
“Today, 55 percent of the pension fund portfolio, that is, the contributors’ savings stock, is outside the country,” the president assured.
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Given the collapse of foreign markets, I ask the administrations of private pension funds to bring pension savings to the country.
Today, 55% of the pension fund portfolio, that is, the stock of contributors’ savings, is outside the country
— Gustavo Petro (@petrogustavo) March 14, 2023
What the pension administrators do is try to maximize the affiliates’ savings while they are building the necessary capital and adding the weeks (1,150 in this case) until the moment of their pension. For this reason, they carry out a series of investments that range from private equity funds, local and foreign fixed and variable income.
How is the investment of the funds divided?
The almost 18.5 million workers affiliated to the pension funds closed January with savings of more than 360 billion pesos. In the first month of the year, profits of 14 billion pesos were recorded.
“The data from recent months have given a positive turn to the behavior of pension funds in the midst of a cycle challenged by various internal and external factors. This type of situation can affect it in the short term, but for longer periods they have contributed to generating excellent returns,” said Santiago Montenegro, president of Asofondos, who explained that said gains weighed close to 70 percent. within the total savings of workers.
Santiago Montenegro, president of Asofondos, a union that represents the AFPs in the country.
Courtesy Asofondos
Currently, pension funds have a great diversification of their investment portfolios and in recent years they have been expanding investment abroad.
Specifically, according to Asofondosa third of the resources managed by the AFPs are invested in public debt.
Next at just under 30 percent are foreign equity assets, such as shares of international companies. These assets are profitable in the long term and with greater volatility in the short term.
According to the union, the portfolio is diversified in several countries and several currencies, seeking the best investment opportunities and at the same time mitigating the risks inherent in financial investment.
About 15 percent are alternative investments like private equity funds and real estate funds, mostly infrastructure or real estate.
The rest are resources in local variable income, local fixed income, external fixed income and other alternatives.
Fixed income abroad represents over 5 percent of the total.
All of this is done through a multi-fund system in which there is a conservative fund, a moderate fund, and a higher-risk fund. The resources of each worker can be invested according to their age and risk profile.
