Introduction to the SAR and Consar’s Decree
The National Commission of the Retirement Savings System (Consar) published a decree in the Federal Register to provide greater flexibility in managing resources for the Mexican Retirement Savings System (SAR).
Increased Investment Limits for Siefores
Among the changes, the limit for Siefores (Simplified Emission Funds) nearing retirement has been raised due to various exercises and financial simulations demonstrating that this increase would generate a higher return adjusted for risk. The limit has been raised from 15% to 20%, according to the Mexican Association of Private Pension Fund Administrators (Amafore).
Impact of the Adjusted Limits
Amafore highlighted that the most significant aspect of this modification to the investment regime is the “calculated expansion of exposure limits for certain assets.” This move aims to inject more flexibility into managing SAR resources, they explained.
Guidance for Managing Resources
The decree establishes guidelines applicable to vehicles with underlying assets composed of Simplified Emissions or Mexican companies, fostering their access to the capital market under a prudent risk management framework. These guidelines allow regulators to issue specific investment instructions for these instruments.
Additionally, the decree clarifies definitions for Foreign Debt Securities and outlines obligations regarding monitoring investments in Structured Instruments.
Clarifications for Siefores Basic Pension Funds
For the Siefores Basic Pension Funds, participation in Fibras (Real Estate Investment Trusts) through vehicles is now permitted, aiming to provide greater regulatory clarity and strengthen the applicable regulatory framework.
Key Definitions and Obligations
The decree also clarifies definitions for Foreign Debt Securities, specifying what happens with debt securities that have domestic credits and cash flows, regardless of the stock exchange where they may be listed.
Furthermore, obligations related to monitoring investments in Structured Instruments have been precisely defined. Any non-compliance results in administrative sanctions.
Summary of Changes
- Increased Investment Limits: The terminal limit for Siefores has been raised from 15% to 20%, expected to boost returns by approximately 140 basis points with only a 10 basis points increase in volatility.
- Expanded Asset Exposure Limits: This adjustment aims to provide more flexibility in managing SAR resources.
- Guidance for Managing Resources: New guidelines foster access to capital markets and allow regulators to issue specific investment instructions.
- Clarifications for Siefores Basic Pension Funds: Participation in Fibras through vehicles is now permitted for greater regulatory clarity.
- Key Definitions and Obligations: Clarified definitions for Foreign Debt Securities and obligations related to monitoring investments in Structured Instruments, with administrative sanctions for non-compliance.
