Mexico's Pension Funds Spike in 2009

Following the recovery in financial markets, Mexico’s pension fund companies more than doubled to a record net profit in 2009.

(January 20, 2010) — In Mexico, the pension industry’s net profit rose to 4.89 billion pesos ($385.5 million) from MXN2.32 billion in 2008, according to the Dow Jones Newswires.

Revenues were up 22% to MXN19.05 billion last year, while return on equity increased to nearly 21%, from 11.6% in 2008. Hindered by more competition and pressure on the pension industry by Congress and industry watchdog Consar, earnings fell to an eight-year low MXN2.28 billion in 2007.

Contributions and a global rally in financial markets during most of last year, starting in March 2009, forced total assets under management to rise 22.8% year-on-year to a record MXN1.151 trillion at the end of December. As of December 31, Mexican regulator Consar reported that 66.3% of total assets were in government securities, 16.5% in domestic private-sector debt, 9% in domestic equities, 4.2% in international debt, and 4% in international equities, wrote the Dow Jones Newswires.

As of early 2008, regulatory overhaul in Mexico abolished commissions on retirement contributions, forcing pension fund managers to charge a single commission on assets under management. Larger pension funds benefited from these new regulations, which served as a catalyst for sector consolidation, the Dow Jones Newswires reported. 

In 1997, Mexico adopted a mandatory retirement savings system for salaried private-sector workers. The self-employed are permitted to contribute to their funds voluntarily. The retirement savings system was based on individual retirement accounts managed by Afores, or companies authorized to manage pensions. Afores are currently Mexico‘s largest institutional investors.

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