The largest pension fund in Colombia seek refuge in the dollar as the world outlook worsens and the reforms proposed by President Gustavo Petro.
(Read: The salary from which withholding will apply in 2023).
Leonardo Mila, chief strategist at Porvenir SA, which oversees about 180 trillion pesos ($37 billion), said the dollar has been key to diversifying your holdings from riskier assetsincluding peso-denominated country bonds known as TES.
“In the midst of the confluence of risks that we are seeing locally and internationally and the sensitivity that we are seeing in the local markets, we have been maintaining a relatively high level of dollars.“Mila said in an interview last week in Bogotá.
“We are slightly underweight some local bonds.” It is an investment strategy that has been followed throughout the Colombian pension industry and there are funds that have reduced its holdings of local government bonds from an April high. Foreigners surpassed them in August to become the largest holders of the instruments, according to data from the Ministry of Finance up to October.
Not that the strategy has helped Porvenir avoid losses. The “moderate” fund of the administrator, which is the largest portfolio in Porvenir with 102 billion pesos in assetslost 1.51% in the 12 months to August, or 11.14% if adjusted for inflation, according to government data.
(See: Funds want to provide technical figures in the pension reform).
SlabColombian assets have been under pressure amid uncertainty on the “historic change of government” since Petro was elected in June, according to Mila, who has held his position for more than a decade.
During the presidential campaign, Petro said he wanted to reform the nation’s pension system to give the government a bigger role, which could hurt savings and widen the current account deficit, according to Bank of America economists.
Petro was elected in June as the South American nation’s first left-leaning president. He promised stop oil exploration in Colombiaraised the idea of taxes on “hot money flows” and said the country could issue public debt to buy land for poor farmers.
Although members of his team have backed down on the ideas, uncertainty has prevailed. This has led the peso to depreciate more than 19% against the dollar since the elections, the pThe worst performer among the 23 emerging market currencies tracked by Bloombergafter the Argentine peso.
(In addition: Petro Government will present pension reform proposal in 2023).
The yield on the 12-year notes has fallen to 13.1% after reaching a record of more than 15% last month. “When you talk about stopping oil exploration, essentially what you are saying is that we will stop dollars from coming in in the future.Mila stated. “It hasn’t happened, but it’s a possibility.”
Bloomberg
