For pension funds such as Afores, although short-term yields are relevant, considering that the funds they managed will be used for the retirement of workers at 65 years of age, the results should be analyzed on the long-term.
According to CONSAR the annualized nominal net returns between January 2009 and March 2016 shows: Sura, Banamex and Profuturo as the three best performing Afores with 10.5, 10.1 and 10.1% returns respectively. (Report to Congress 1st quarter of 2016 Page 46).
The weight of different asset classes in their portfolios average: 74% in fixed income (53% in government bonds, 20% in corporates and 1% in international debt); 20% in equities (13% in international equities and 7% in domestic equities); while 6% of AUM are invested in structured instruments and mexican REITS or Fibras.
In the report, CONSAR presents the performance attribution by asset class for each one of the 11 Afores. The analysis (page 48) shows that 3/5 of the performance comes from debt instruments; 20% equities and the difference by others asset class incluiding Fibras and structured (where are included CKD’s). Fibras and CKD´s, only have contributed to portfolio performance 0.1% of 9.5% average return. It is noteworthy that the first CKD emerged in 2008 and the first Fibra was born in 2011 so the contribution do not reflect the maturity period requiring investments in CKDs and in the case of the Fibras considered a lower time investment since inception.
Reviewing the performance attribution by asset class for each Afore it can be seen that the most profitable Afores lead returns in two or more asset classes. Sura for example excels in Bonds, international equities, as well as structured and Fibras relative to the others Afores. Afore Banamex is distinguished by good results in the inflation linked bonds (Udibonos and CBIC) and international instruments. In the case of Profuturo, inflation linked bonds, corporates and local equities are where the afore leads.
Looking at results by asset class, Invercap generates higher returns in bonds which allows for it to place 4th place in returns. Azteca is the second most profitable in this asset class, however this result is not good enough to place it at the top. This Afore also excels in domestic equities.
XXI-Banorte also is among the Afores with better results in local bonds and corporates papers, however these results are not enough and the returns of this Afore are below the average performance of the 11 Afores (9th place).
Looking at investments in inflation linked bonds, the Afores that have obtained the best results in these instruments are: Profuturo, Banamex, Pensionissste and Principal. Pensionissste has also good investments in corporate debt , which allows it to stand in fifth place in the returns table while Afore Principal also excels in international equities ttaking the 7th place.
For the asset class of structured instruments and Fibras, the Afores with the highest returns are Inbursa and Sura contributing 0.4 and 0.3% compared to an average performance in this asset class of 0.1%.
Overall each one of the 11 Afores have at least one asset class in which they stand out for their results, however, if the weight is not important in contributing to performance, its advantage is not enough to take them to the top performance on a stage of just over seven years (January 2009-March 2016). Not only does the manager have to be good in asset classes that have greater weight in the portfolio compared to competitors, but also they need not be so bad in the others asset class to offer attractive returns.
Column by Arturo Hanono