Chile’s Pension Schemes Raise Investments Abroad

The country’s $114 billion in pension assets are increasingly shifting oversees -- mainly to the US, Brazil and China.

(April 8, 2010) — Since 2007, Chile’s regulator has made it easier to invest its $114 billion pension assets in other countries. By the end of 2009, 43.7% of Chilean pension assets were invested outside Chile, and the move abroad is expected to continue.

In mid-2009, the maximum level of investments Chilean pension funds could have outside the country was raised to 60% of total assets from 30% in 2007.

With 97% of the country’s employees making contributions, the country’s fully-funded pension system based on individual savings accounts is considered by some to be a model for the world. Chile’s pension fund assets are equivalent to about 70% of the country’s GDP.

“Financial vehicles negotiated outside our country offer not only opportunities to make gains, but they also have an important effect on diversification,” said Eduardo Steffens Vidal, the chief investment officer of Chile’s AFP Cuprum, one of the country’s big pension schemes, according to Global Pensions.. While investments in assets abroad are on the rise, the news service reported that alternative assets like hedge funds and private equity are still excluded from Chilean pension shcemes’ asset mix.

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According to Global Pensions, Blackrock has been the largest beneficiary so far, accounting for 11.33% of the assets Chilean pension funds invested overseas by the end of 2009. Other large beneficiaries included Fidelity (8.81%), Schroders (7.3%), Vanguard (6.57%) and JP Morgan Chase (6.02%). In terms of location, the US leads as the most attractive destination for investments 23.2% of the total. Others include Brazil (14.6%) and China (7.8%).

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742