Retirement fund managers (afores) are among the most important investors in Mexico. The country’s 10 Afores manage and invest the 8 billion pesos that workers have in their retirement accounts.
Afore directors recognize that they are presented with investment projects in known assets and over time new projects will be presented to them, who want to obtain a piece of the managed resources.
They offer private projects, infrastructure, government and private debt, various assets, including fiber, Cerpis, Ckd’s, and international and national equities. Managers are willing to analyze projects, always prioritizing the risk-performance equation.
Everyone agrees that they must have the risk controlled. Directors of the Afores Inbursa, Azteca and Principal are willing to listen to many investment options, but they also noted that before being promoters of public or private projects, they have the obligation to take care of the workers’ resources and make their resources grow above inflation with the least possible risk.
Questioned about their role in the development of the Mexican stock market, they are clear, it is an area that interests them, but it lacks depth, liquidity and supply of new names, among other challenges. The above prevents more resources from being invested.
The directors say that the new perspectives that the new Securities Market and Investment Funds Law will offer them, including simplified issues, which will be for qualified investors like them, sound interesting and will be analyzed in depth.
They emphasize that there are also other viable options to invest workers’ resources, such as metals, other assets and eventually, when the law allows, analyze crypto assets.
They recognize that a large part of the resources of the 8 trillion pesos they manage are invested in government debt, with 50% of the resources, and private debt with 15% of all the capital of the more than 70 million accounts they manage. They are very safe investments that have given excellent returns, they detailed.
The resources they have represent 22% of the country’s Gross Domestic Product and will be more and more, they will require projects that give returns above inflation to workers and if in that way they can support the development of the country’s infrastructure, private projects and variable income, among others, they are willing to do so.
Principal Afore
We must open the system to other investment options
The Retirement Fund Administrators (afores) sector is continually seeking greater diversification of its investments, betting on new, more profitable assets, although with greater risk.
Josemaría Bolio, general director of Afore Principal, said that among the expansion proposals is the possibility of investing in precious metals, foreign assets and crypto assets, although a long-term approach is maintained in the face of market volatility.
“There is an investment limit in foreign securities (how much of the portfolio can be invested outside the country). It is believed that this is one of the areas that should continue to be reviewed to determine if the current limit is correct, given the investment alternatives and managed resources, especially considering that in other countries the limit is different from that of Mexico,” he explained.
In addition, he considered that there should be an opening to invest in metals such as gold or silver. “Currently, investing in these assets is not considered in the investment regime.”
Regarding cryptocurrencies, he highlighted that, “it is known that even in the United States withdrawal schemes have begun to be opened for investment in crypto. Although this has not yet happened in Mexico, it is understood that there are conversations and openness so that they can be adopted, as long as the necessary conditions exist.”
Lack of depth at BMV
Although the Mexican Stock Exchange (BMV) is important, a stock market system with more alternatives and greater activity is required, due to the large volume of resources. “The existence of new alternatives is celebrated, such as the simplified issues introduced with the reform of the securities market,” said Bolio.
“A stock market system with more alternatives and activity is required, given the large amount of resources that must be managed. In this sense, the sector celebrates that there are currently several new issues in process, which will benefit the system,” stated the manager.
Regarding the new investment options introduced, he stated that simplified emissions are one more option for the market, “but there is still no defined figure or plan to share about the percentage that will be allocated to this asset class.”
From Afore Principal, they seek to work together with the regulator to ensure that investment limits are optimal in favor of finding the best returns for workers.
Long term investment
The sector recognizes that all markets have cycles. Recently, the system has generated very significant capital gains.
“It is essential to remember that Afore investments are very long-term and do not always generate capital gains. Therefore, administrators and regulators must have a lot of communication with workers so that they understand that there are cycles in the markets and in the portfolios,” he stated.
Finally, competition within the Afore system is seen as good, healthy and essential to perfect the system.
“There is a lot of respect for all the competitors, who participate in the Mexican Association of Retirement Fund Administrators (Amafore). The industry sees competition as a necessary engine to achieve better performance for the benefit of workers,” said the Principal representative. (With information from Cristian Téllez/Marcos Olvera)
Azteca Afore
The name of the game is called diversification
For Eduardo Parra Ruiz, general director of Afore Azteca, the name of the game is called diversification and the retirement fund manager’s portfolio is “diversified to be able to offer the best returns to workers.”
In an interview, the manager said that the retirement fund manager he directs has a diversified portfolio; However, a vehicle that is not so attractive at the moment is national variable income.
This, despite the fact that the Mexican stock markets have exceeded their historical maximum on more than 10 occasions this year. They have even had higher returns than their American peers.
“Within diversification we always consider return expectations for each of the asset classes, and it turns out that when we analyze the Mexican Stock Exchange it is not necessarily the asset with the greatest risk potential; however, it is part of our portfolio,” he commented.
Parra explained that one of the reasons why the BMV has had a return of almost 30% this year is “because it has been very cheap.” However, investing in equities is for longer-term horizons.
“We would like the percentage we invest in national equities to be greater (currently it is close to 6% of the resources), but unfortunately the BMV is not large enough to generate sufficient liquidity, market penetration is reduced, and so we prefer to make more aggressive investments or with greater participation. But it is undoubtedly part of our mix of assets that we select and that we are maintaining and are going to maintain.”
Another vehicle where Azteca has invested 6.7% of its total resources is in Real Estate Investment Trusts (fibers), which are highly attractive, because they are stabilized assets that already generate constant flow with income.
“This gives us certainty that the flows are predictable, and that predictability helps us generate interesting returns.”
The manager explained in this sense that, through fibers, “we have seen how certain areas of the country have developed, whether due to logistics issues, or industrial or commercial issues. There we also have a diversification of various fibers, from the education side, schools, etc.”
Eduardo Parra commented that the most attractive thing about fibers is that “in some cases, especially those of an industrial nature, the income is dollarized and in other cases it has a real rate; that is, it is adjusted to inflation.”
In addition to fibers and the BMV, it invests in Investment Project Stock Certificates (Cerpis) and other alternative instruments. The Afore has about 20% of its resources invested in corporate debt.
Afore Azteca invests in several infrastructure projects, such as roads, electricity, among others, although they are cautious. “Simply due to the fiduciary duty that all Afores have, the risk-performance equation must be balanced. Even if they invite us to a project and propose it to us, we first analyze it and if we see that it has risk we reject it,” he explained. (With information from Diego Ayala)
Afore Inbursa
New Securities Market Law, opportunity for the pension system
For Afore Inbursa, the modifications to the Securities Market Law represent an opportunity given the new options presented in the market.
José Ignacio Jiménez, general director of this administrator, highlighted that “we love any effort to develop the markets. We will be active in any investment, as long as we see that the risk is very well understood on our part and what is controlled.”
He clarified that “any investment that is correct for the workers, any effort that is to develop the market, any of us who invest, whether national or international, is welcome.”
The manager highlighted the performance that investment in shares of Mexican and foreign companies has given them.
“The returns during the year have been spectacular, we honestly expected a more volatile year, and that interest rates would fall and that would revalue medium and long-term instruments.”
He highlighted the advance in the Nasdaq and the value of technology companies that are experiencing a revolution, which translated into share prices, leading the market to have unexpected returns. He said that Afore Inbursa is one of the administrators that has the highest percentage of its portfolio in national equities, since the hallmark of the house has been to believe in Mexican companies.
“The companies listed in the main index of the Mexican Stock Exchange (BMV) are among the best in the country, with the best management,” he added. However, he recognized that more investment options are required in more listed companies, an effort must be made as a country to develop the market, since there is a lack of companies and others that are in the market have little marketability.
Asked about the large amount that the system has invested in government bonds and private companies, more than 65% of the resources, he said that the investment regime has to grow.
He clarified that, with the rapid growth of contributions, with the returns that are being given, the account balances grow very quickly and the markets do not develop at the same time in the national part to be an offer for that demand.
“We must wait for the variable income and private capital part to develop to be able to invest. It is a process that is going to take place,” he added. Afore Inbursa is interested in participating in private and public projects, such as infrastructure development; However, its mandate is to be responsible and give the best returns to workers, measuring risk.
“Our role is for workers to have the best retirement balances, if the government has the correct structures in that direction, we will join in.”
It is a virtuous circle that gives a lot to the country, to the workers and to the Afores; However, “there are voices that say ‘there is the Afore money’, it must be clear that the money belongs to the workers, that our obligation is not to generate projects, but to take care of and give returns above inflation.” (With information from Eduardo Huerta/Cristian Téllez)
