Last April, the governing bodies of the National Commission of Savings System for Retirement (CONSAR) approved amendments to the Investment Plan to which the Investment Company Specialized Retirement Funds (SIEFORES)are subject.
Because of this, and in order to establish the investment regime by which the Siefores must abide, last Tuesday the Ministry of Finance and Public Credit (SHCP) in Mexico published in the Official Journal of the Federation (DOF), the general provisions which establish the investment regime by which investment companies specialized in retirement funds must abide.
According to a statement made to Funds Society by CONSAR sources, "these modifications allow for the consolidation of international diversification opportunities and strengthen investment risk control."
The amendments are:
- To Make countries which belong to the Committee on the Global Financial System (CGFS)of the Bank for International Settlements (BIS) eligible for SIEFORE international investments, overruling the requirement to be a member of the Technical Committee of IOSCO for these purposes. According to Consar, the modification guarantees that the highest standards of regulation and supervision of international markets in which the SIEFORE are involved, are maintained.
- To add "South Korea" and "Singapore" to the group of eligible countries, as these "have shown great economic dynamism, financial markets which are effectively regulated and monitored, and have a remarkable level of development which favors diversification and profitability of resources".
The changes made to the provisions of the Investment Regime, also adjust the risk management tool which is used to monitor the volatility and risk of the investment portfolio. "Therefore, it seeks to limit the volatility of this tool, known as the Differential of the Conditional Value at Risk, so as to eliminate the factors that made it pro-cyclical, which means that investors who used it could contribute to amplify market volatility or, otherwise, in times of stability, investors could act complacent without prudently limiting the risks. In this way, the AFORES will invest more prudently, thus contributing to the security of pensioners’ resources", concluded the Commission.
The maximum limit of 20% laid down by law for investments in international markets shall remain intact, as well as the asset classes previously permitted, which can be seen in the following table:
You may review the DOF in the following link.