News Column

Fitch: 2014 Outlook Positive for Mexican Pension Funds

February 11, 2014



MONTERREY, Mexico--(BUSINESS WIRE)-- The 2014 outlook for Siefores (pension funds) in Mexico is positive, according to a new Fitch Ratings report.

Assets under management (AuM) evolved favorably in 2013, exceeding MXN2 billion in October. Fitch expects the positive growth to continue through the natural growth of the sector and from Siefores returns (in the long-term investment horizon), the increase in voluntary savings and the incorporation of new funds in the market through the administration of the additional Siefores. In this regard, Consar (Mexico's pension fund regulator) has had a very active role, favoring the diversification of portfolios and strengthens Afores (pension managers) investment processes and risk control. Fitch expects changes to Mexico's pension system by the regulator to continue.

Afores portfolios show more diversification with a significant increase in investments like equities (national and international) as well as structured securities. As AuM continues to grow, the need for new investment instruments prevail and investments in international markets could increase in the future. Mandate operations will then become more important, which sets the tone for more diversification and a specialization pension system in Mexico.

Risk from international volatility is likely to continue. However, the capital losses that Siefores portfolios had during 2013 will not have a permanent impact on the managed resources. Fitch expects that the terms and due dates of investments will continue to lengthen, investment in reviewable rates instruments will increase, diversification (to reduce exposure to volatility) will continue, and risk measures by Afores will be strengthened.

During 2013, Basic Siefores pension funds provided an averaged compound annual return of 7.96% over a horizon of three years, which compares favorably with those obtained by other market instruments and over inflation. Fitch estimates Siefores returns to be more attractive in the future due to a more flexible investment regime and Afores exposure to financial institutions specializing in sophisticated global market values through mandate schemes.

The full report, 'Outlook 2014: Pension Funds, Diversification as a Strategy in a Volatile Environment', is available at www.fitchratings.mx and www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2014 Outlook: Pension Funds (Diversification as a Strategy in a Volatile Environment)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=733255

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Isaura Guzman, +52 81 8399-9100 x. 1136

Director

Fitch Mexico S.A. de C.V.

Prol. Alfonso Reyes 2612

Monterrey, Nuevo Leon, Mexico

or

Alfredo Gomez, +52 81 8399-9100

Senior Director

or

Adriana Beltran, +52 81 8399-9100 x. 1151

Director

or

Media Relations

Elizabeth Fogerty, New York, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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