Last updated: 04:16 / Thursday, 10 June 2021
Column by Arturo Hanono

AUM’s Growth for the Afores Will Fuel Local and Global PE Investments

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In 12 years, the Mexican institutional investor has increased its investments in private equity through public vehicles registered on the local stock market (CKDs and CERPIs). Today these investments reflect a market value of 16.186 billion dollars of which 13.544 billion dollars come from the Afores (84% of the total), with the remaining 16% coming from other institutional investors such as insurance companies and such.

The total represents 1.4% of Mexican GDP and this figure doubles if one considers committed capital, which amounts to 32.824 billion dollars. This figure highlights the importance that the CKDs and CERPIs are gradually acquiring, as well as their great potential.

According to Santander's area of analysis in the document: How Should Mexico’s Pension Reform Benefit Its Financial System? prepared by Alan Alanís, Claudia Benavente, Héctor Maya and Jorge Henderson (February 2021), it is estimated that Afores’ AUM could more than double from 237 billion dollars at the end of 2020 to 537 billion dollars by 2027, via employee contributions, investment returns, and benefits from the pension reform. This growth means that assets under management will go from 20% of Mexican GDP in 2020 to 32% in 2027.

The same document comments that in the last decade, assets under management increased at a compound annual growth rate (CAGR) of 13%, with 7% originating from returns and 6% from employee contributions.

Additionally, if the assets under management double in six-year periods, the potential investments in bonds, equities and private equity, among others, will also experience a boom.

Of the 12 years that institutional investors have been investing in private equity, in the first 6 years (2009-2015) investments were focused on local investments (CKDs) reaching a market value of 7.835 billion dollars. By 2021, this has almost doubled reaching 12.944 billion dollars (+ 65%).

In 2018, the year in which the Afores began investing globally, the market value of available CERPIs was of 1.827 billion. By March 2021, it had already reached a market value of 3.243 billion dollars (+ 78%), which represents 1.4% of the assets under management of the Afores while the investments in local private equity (CKDs) is 4.3% to reach a combined total of 5.7%.

If this 5.7% of total assets under management is simply maintained, does not grow at all, if it were applied to the 537 billion dollars projected in total AUM by Santander for 2027 it would represent 30.6 billion dollars.

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3In the past 12 years that the CKDs have been in place there have been 121 funds, while in the three years since the creation of CERPIs there are already 51. The explosive growth in the issuance of CERPIs with respect to the CKDs is due to the fact that they have primarily focused on fund of funds (43) while the others have been more sectorial focused as can be seen in the table.

This fund of funds CERPIs’ trend has led to their creation according to the risk profile of the investor or by the age of the workers affiliated (years of retirement of the worker to get their pension and / or money saved), or “Target Date Funds”.  Blackrock, for example, issued 7 series of its CERPI in 2019, while Lock Capital and Spruceview México released 7 and 8 series respectively in 2020. These three issuers alone represent 22 of the 51 CERPIs.

With this projected dynamism, investments in local and global private capital through CKDs and CERPIs will continue to grow.

Column by Arturo Hanono

About Arturo Hanono

Arturo Hanono is Senior Advisor in Mexico at Alpine Capital Advisors, firm specialized in global private equity advisory. With over 35 years of asset management experience in Mexico, Arturo supports all of Alpine’s fundraising and investor relations efforts in Mexico. Prior to joining Alpine, Arturo held the CIO position at various Mexican pension funds. Arturo is currently an investment committee member of several companies. He holds a degree in Economics from Universidad Anahuac. He won first place in the National Securities Market Prize organized by the Mexican Stock Exchange (BMV) with his professional thesis in 1985. You can find him at arturo@alpineca.com
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