Colombia Pensions Get OK to Invest in Alternatives

The Colombia government will soon allow the country’s pension funds to invest in alternatives such as real estate, private equity hedge funds and commodities, according to a report.

Colombian funds were previously barred from investing in alternative vehicles; pension portfolios in Colombia are largely made up of public debt.

More on the change, from Reuters:

The decision, aimed at diversifying risk and bolstering profit, will modify previous rules that only allowed pension funds to invest in public debt and other low-risk portfolios. It is set to be announced by decree before the end of March, government and pension fund sources said.

The change, made in consultation with pension administrators, will allow for about $10 billion in fund resources to go toward alternative investments. As of November, pension funds controlled some 165.2 trillion pesos ($49.8 billion).

“The international experience has shown how pension fund administrators have looked for non-traditional investment possibilities, taking into account the need for long-term profit and deposit security,” the finance ministry said in a technical bulletin that forms part of the draft decree and was seen by Reuters.

“These instruments have served to diversify the risks that portfolios confront in the face of low international interest rates.”

Analysts said the current restrictions limited profitability.

Pension funds are the largest holders of Colombian public debt, with 56.3 trillion pesos ($16.9 billion) under management at the end of January.

The alternative funds will have to comply with rating requirements, asset limits and other conditions.

Any fund’s allocation to alternatives will be capped at 20 percent.

Photo by  Horia Varlan via Flickr CC License