The balance managed by retirement fund managers (Afores) totaled 4.9 trillion pesos at the end of October, which meant an annual contraction of 10% in real terms.
Data from the National Retirement Savings System Commission (Consar) show that it is the first annual contraction in that period for 14 years. In 2008, the balance managed by the Afores fell 2.8% in real terms.
Janneth Quiroz, deputy director of economic analysis at Monex, told El Economista that the contraction in the balance managed by the Afores is a consequence of the significant increases in interest rates from different central banks, such as the United States Federal Reserve (Fed). or the Bank of Mexico (Banxico), because it directly impacts the investments of the Afores in the secondary bond market.
Quiroz explained that in March of this year they began to increase rates, but it was not until June when the Fed and Banco de México began with increases of 75 basis points.
Investors prefer fixed income bonds
Consar data shows that 50.56% of the Afores’ investments are in government securities; 11.84% in international equities; 6.82% in national equities, and 8.0% in structured instruments, among the main ones.
The Monex analyst explained that the secondary market is where the bonds that are already placed are bought and sold, so in principle these bonds have to be sold at a lower price because an investor currently prefers to acquire a bond in the primary market (such as Cetes) because they have a higher rate.
“The secondary market has to pay at a discount to try to compensate for the fact that they are being paid a lower rate. This fall in the price of secondary market bonds is what is largely causing this type of portfolio As the Afores are presenting significant losses”, he commented.
During this year, the Retirement Savings System (SAR) has presented a period of high volatility that has triggered capital losses, which have totaled 422.268 million pesos at the end of October.
However, the Consar has anticipated that during the first half of November the SAR has recorded capital gains of close to 120,000 million pesos, so a recovery in the balance of the Afores could be expected in said month.
