Diversifying investments, a challenge for Afores: Amafore

With managed resources of 4,972 billion pesos as of October 2022, the Afores face the challenge of continuing to diversify investments to increase the savings yield of Mexican workers, stated the president of the Mexican Association of Afores (Amafore), Bernardo González roses.

When inaugurating the Amafore 2022 Meeting, he highlighted that in the last 25 years practically 50% of the resources managed by the Retirement Savings System (SAR) have been the result of the returns generated by the investments made by the fund managers for the retirement (afores) of Mexican workers.

“Of each peso in the Retirement Savings System, around half corresponds to the income generated by the Afores.”

Likewise, he mentioned that the Afores have paid interest at a rate close to 6.0% per year, free of commissions and subtracting the effect of inflation.

Bernardo González made a comparison to measure the returns that the administrators have achieved. “A person who saved 10 pesos in the Retirement Savings System in January 2008, at the end of last May would have a total of 29 pesos. While a person who invested in company shares, the same amount and for the same period, would only have 18 pesos, a difference of 64%”, he emphasized.

The President of Amafore explained that the Afores invest always taking care of the risks of the financial markets in order to cushion losses.

They also make investment decisions considering the time that workers have to retire, since the closer their retirement age is, they seek safer instruments, such as government debt, to protect returns.

The 10 administrators that operate in Mexico invest the savings of workers in various financial instruments, such as shares of Mexican and international companies, national and foreign debt, in infrastructure through vehicles such as real estate and energy fibers, in addition to the so-called instruments structured as Development Capital Certificates (CKD) or Investment Project Certificates (Cerpis).

They prefer government securities

As of October of this year, 50.56% of the total resources managed by the Afores were invested in government securities. While 6.82% was in national equities and 11.84% in shares of foreign companies.

The rest channeled the resources to other assets such as fibers (2.77%), CKD and Cerpis (8.01%) and local company debt (15.38%), to name a few.

“The Afores are one of the best alternatives for saving and generating returns,” he stressed.

The President of Amafore said that the losses generated by the volatility of the market are temporary; however, he assured that at the time of retirement this effect is diluted, since the average capital gain when the financial market grows is close to 40%, in contrast to when the market falls the capital losses barely mean 8 percent.

Bernardo González said that another challenge facing the Afores is to invest in projects that promote environmental sustainability.

The resources managed by the Afores are equivalent to 17% of the Gross Domestic Product of Mexico.

judith.santiago@eleconomista.mx