Although the bankruptcy of Silicon Valley Bank (SVB), a medium-sized bank in the US generated uncertainty and a call from President Gustavo Petro for the Pension Fund Administrators (AFP) to bring the pension savings that are out of the country due to the “collapse of foreign markets”the Government itself ruled out problems.
(The ABCs of the Silicon Valley Bank failure and its impacts).
“I ask the administrations of private pension funds, given the collapse of foreign markets, to bring pension savings to the country. Today, 55% of the pension fund portfolio, that is, the savings stock of contributors, is outside the country”, Petro said on Twitter.
But an analysis of the Financial Supervision says that in the AFPs and other institutional (investors) there are no direct investments in SVB.
“The AFPs have some investments in funds that follow stock indices that may affect their valuation, but they are funds that are admissible by regulation as long as they have adequate levels of diversification,” says the analysis and adds that the exposure of the AFPs to venture capital funds “It is practically nil, therefore, an impact in this industry would not be expected either.”
(Fall of Silicon Valley Bank, would it affect Colombian companies?).
Pension and investment experts warned of the dangers that some $190 billion of the pension savings of 18 million Colombians would be reintegrated into the country. They point out inflationary aspects that a decision of that size would constitute and the risk of other problems since there would not be a sufficient number of options to place those resources and the lack of diversification in investments.
Asofondos, the guild of four AFP (Future, Protection, Colfondos and Skandia) said that in times of high volatility in the markets “The investment diversification strategy has been a winner and has made it possible to mitigate impacts not only in the short term, but also in longer time windows.”
It points out that these investments in fixed and variable income assets in the country and abroad, “They make it possible to explain to a large extent the gains that the savings of the more than 18 million workers have today in their pension funds, yields of 67% of the total saved.”
As of January, the total savings of affiliates reached $360 billion and the union recalled that according to the most recent report from the Organization for Economic Cooperation and Development (Oecde), “Colombia has the best real average annual profitability of the last 20 years, the best result of more than 18 countries (6.2%).”
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“Thinking of putting all the eggs in one basket would be dangerously exposing the savings that workers build in their pension funds, and putting their future patrimony at risk for old age”said Santiago Montenegro, president of Asofondos.
Daniel Wills, vice president of Technical and Economic Studies of the union, said that the law prohibits funds from investing more than half of their portfolio in public debt and that the same restriction would have to be applied to Colpensiones savings, to avoid falling into the temptation of using pension savings to finance the Government.
Juana Téllez, head of Economic Research at BBVA, believes that pension funds are a very important player and this must be maintained since they are large buyers of government debt and the stock market.
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