Mexican Pension Investment Heads Excited about PE Prospects

August 13, 2010 ( – About $460 million in private equity funding to real estate and debt portfolios so far in August should put Mexican private pension programs on track to more than double their private equity holdings, Reuters reported.

According to the news report, the 14 pension funds, known as Afores, may allocate 8% of their roughly $100 billion in assets to “capital development certificates,” or CKDs, which regulators conceived last year as a way for the Afores to make private equity investments.  Reuters said dozens of private equity projects are being considered as the pension funds seek to boost 2010 returns; the Afores purchased about $1 billion worth of the new certificates through a handful of deals in 2009.

Mexican President Felipe Calderon wants the Afores to give a capital injection to roads, ports and other infrastructure projects while meeting the growing needs of an aging population.  About 65% of Afore holdings are in ultra-safe government debt that cannot deliver the long-term returns that officials hope to see, the news report said.

According to Reuters, pension investment officials endorsed the CKDs as a way to try out their money managing abilities and differentiate their funds from competitors. Afore managers say they are sure retirement money is safe in the new securities because they are run by asset managers with proven track records.

“These projects will have trans-national tenants delivering quick revenue and with very little variability,” Enrique Solorzano, director of investments for ING bank’s Afore, said of the real estate funds in the pipeline, according to Reuters. “There is a certain level of risk — of course, these are private equity deals — but they are relatively low levels of risk.”