(September 12, 2013) — CIOs in Mexico, Belgium, and Hungary are subjected to the biggest number of investment limits, according to research from the Organisation for Economic Co-operation and Development (OECD).
A study into the quantitative portfolio restrictions applied to pension funds internationally found while all OECD countries are subject to some form of investment limitations, some countries are harder hit than others.
Mexican pension funds, for example, are not allowed to invest in equities, real estate, investment funds, or loans.
There is also a maximum of 35% allowed in corporate bonds, up to 10% of which can be in financials and banks. Mexican pension funds are also limited to bank deposits of no more than 250,000 in Mexican pesos and 25,000 US dollars in foreign currency.
CIOs in Mexico are also hit with rules on minimum diversification limits, which say up to 10% of the funds’ assets can be invested in debt issued by any single issuer, except for credit institutions, the federal government and the central bank.
Only 5% (or in special cases 10%) of assets can be invested in securities issued by anyone who has a relationship with the fund manager, and at least 51% has to be invested in inflation-linked or inflation-protected securities.
There are also rules governing duration—65% of the funds’ assets must be invested in securities with a maturity of less than 183 days.
In Hungary, CIOs have to contend with a 10% limit on securities issued by the same issuer, and a 20% limit on the overall value of securities by an organisation belonging to the same banking group.
Funds are also not allowed ownership in business organisations in which the founders of the fund, employers of the fund members, the donors to the fund, or any service suppliers of more than 10% of the stakes.
Hungarian CIOs also have to contend with limitations on domestic corporate bonds, domestic securities, investment units, mortgage bonds, quoted shares, and other bonds. In addition, a fund can’t own more than 10% of registered capital or equity of a business for more than a year and no more than 10% of securities issued by the same issuer.
And in Belgium, pension funds have equity limits of 65% for quoted stocks, 30% for unquoted stocks, a 40% limit on real estate, a 30% limit on investment funds and no more than 40% can be invested in mortgage loans. Direct limits on foreign securities also apply—65% for Belgian CIOs.
At the other end of the spectrum, the most uninhibited places on the planet to invest are found to be the UK, the US, New Zealand, Australia, Canada, the Netherlands, and Ireland.
The OECD’s full findings can be read here.
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