Chile: AFPs continue to increase their exposure, reaching its highest level since May 2021

RIO DE JANEIRO, BRAZIL – After lowering their exposure to Chile for ten consecutive months, at the beginning of this year, there was a change in the investment portfolio of the AFPs. In January, for the first time since February 2021, they registered an increase in their presence in the country.

And in February, the AFPs continued to increase their exposure in local assets for the second consecutive month, going from the 47.57% they recorded in January concerning the total funds, to 48.7%, with an amount of US$84.2 billion. In this way, the investments made by the Pension Fund Administrators in the country reached their highest level since the 50.5% recorded in May 2021.

In February 2021, more than half (52%) of the total pension funds were invested in Chile, according to data from the Superintendence of Pensions. However, from then on, this figure began to fall month by month, piercing the 50% barrier in June of last year, when for the first time since records have been kept, the AFPs’ investment in local assets was below (48.57%) of international assets (51.43%).

It then continued to fall but seems to have reached a floor at the end of 2021 since, in December, the AFPs’ exposure in local assets reached 44.47% of the total funds, the lowest on record. Then, in January, the trend changed.

In this context, the new increase recorded in February was mainly due to the increase made by the AFPs in fixed-income investments, while the opposite occurred with variable income, where a decrease was recorded.

Thus, last month the fund managers increased their investments in fixed income from 41.03% (US$70.2 billion) to 41.97% (US$72.5 billion). On the other hand, variable income decreased from the exposure of the AFPs in January of 6.09% (US$10.4 billion) of the total pension funds to 5.87% (US$10.1 billion) in February.

On the other hand, looking at what happened with investments abroad, in the total, the AFPs decreased their exposure there from 52.43% to 51.3% (US$88.7 billion) last month.

And there, the drop was explained by both fixed income and equities. The former decreased from 15.43% in January to 14.97% in February. Meanwhile, equities fell from 36.67% to 36.09% between one month and the other.

It should be recalled that the AFPs have deposited more than US$50 billion to their affiliates between the three pension fund withdrawals since the first of these came into effect on July 30, 2020. Since then, the Chilean market has suffered from the rise of the dollar, global and local inflation fears, and the Covid-19 outbreaks, but the withdrawal of resources from the pension funds was one of the main factors that hit it the hardest.