In what do private funds invest the pensions of Colombians

On Friday, the 15th version of the Asofondos Fiap Congress was opened in Cartagena, directors of the union assured that the Colombian Pension Fund Administrators (AFP) have an interesting distribution of resources on six fronts.

The financial superintendent, Jorge Castaño, reported that in 2021 33.8% of the savings managed by AFPs are invested in domestic fixed income (for example: corporate bonds or CDTs); while 31.6% in foreign equities (as purchases of shares), 14.8% in alternative investments (such as materials) premiums), 13.2% in domestic equities, 3.7% in sight investments (faster returns) and 3.9% in foreign fixed income.

The nearly 18 million workers affiliated to pension funds closed last year with savings of more than $357.8 billion, with returns that for the twelve months alone reached 31.8 trillion pesos. In this way, Colombian AFPs generate returns that are higher than those of funds in Switzerland, the United States and Canada.

The managers of Asofondos also reiterated that the commissions charged by the funds are among the lowest in the region. As recorded by the regulatory body, AFPs charge a fee of 3% on the Contribution Base Income (IBC), resources that are allocated for the payment of the administration fee and pension insurance.

In fact, the latest report from the Organization for Economic Cooperation and Development (OECD) shows the real returns of the country's AFPs were 7.2% in 2020, exceeding the average of member countries (6%), as well as those of nations such as Holland (6.5%), Ireland (6%) and Finland (4.5%).

According to the latest figures from the Financial Superintendency of Colombia (SFC), Protección is the fund that recorded the highest returns between 1994 (the year the AFP started operating) and 2021, with 15.06%. It is followed by Provenir (14.96%), Colfondos (14.68%) and Skandia (14.4%).

According to Juan David Correa, President of Protection and of the Board of Directors of Asofondos, although financial markets have been volatile in the last month, given the geopolitical conflict in Ukraine, pension savings returns must be analyzed in the long term and, in that sense, the diversification of the portfolio of private funds is key.

In this regard, during the Asofondos congress, some experts raised where Colombian investors should look to preserve this dynamic of yields in the midst of high inflation, rising interest rates and electoral uncertainty.

Kathryn Rooney, director of global macroeconomic research and investment strategy for Bulltick, said there are opportunities to invest in energy-related commodity and bond sectors (those close to oil).

due to the poor targeting of State subsidies, only 10 per cent of Colpensiones members will retire, as reported by RCN Radio.

According to the union, of the 6.5 million older adults in Colombia, only 1.6 million have been pensioned, while more than 3 million today have neither a pension nor a subsidy.

In this regard, the president of Asofondos assured that, due to the lack of pension coverage, and the poor targeting of state subsidies, 90% of Colpensiones members will not be pensioned, according to what was compiled by the Bogotá broadcaster.

“In the public system there are no savings, there is no saving, there to retire the person has to pay 1,300 weeks contributions and on average a Colombian worker manages to contribute 500 weeks, which is why only 10% retire,” Montenegro explained during the Asofondos Congress, as reported by the same media.

KEEP READING: