New Investment Rules for Afores: How Do They Affect Your Savings?

The government of Mexico has announced recent changes to update the investment framework aimed at boosting Afore investments for the benefit of workers. These new rules include an increase in investment limits for structured instruments, FIBRAs, and support for simplified issuers.

A change has been implemented to the Generational Siefores model over the past five years, along with pension system reform that began in 2020, which is expected to significantly increase the resources managed by the Afores. Additionally, there was a reform to the Securities Market Law in 2023 aimed at promoting the growth of the debt and capital markets in Mexico. The most notable modifications are as follows:

The legislation states that Afores must invest workers' resources in instruments of various risk levels, which translates to variations in returns depending on the age of the savers. This is done through Siefores (Specialized Investment Societies for Retirement Funds). Changes that modify investment limits in different financial instruments have been published in the Official Federal Gazette, all aimed at providing higher returns on workers' savings. According to the National Commission of the Retirement Savings System (Consar), the new modifications are based on three aspects:

Investment Limits in Structured Instruments It is expected that greater exposure to alternative instruments will benefit portfolios, especially in the Siefores of younger workers. Therefore, limits for this class of assets are increased, encouraging greater investment in national projects, specifically in energy and infrastructure. Afores will be able to allocate up to 30% of their assets under the conditions set forth in the Unified Financial Circular. Investment Limits in FIBRAs In light of the current reshoring trends, an increase in the demand for industrial and commercial space in the country is anticipated, which will positively impact FIBRAs. With this change, younger workers’ Siefores will be able to have greater exposure to these types of assets, up to 12.5% of total assets. Investment Limits in Foreign Currency Instruments With the new Generational Siefores scheme, the limits for foreign currency instruments remain unchanged across all Siefores. This update to the Investment Framework harmonizes with other assets without compromising returns while limiting risks. Limits on Conditional Value-at-Risk Differential (DCVaR) To maximize the benefit of the risk-return profile adjusted to workers' careers, limits on the DCVaR are increased. This parameter allows for the evaluation and comparison of risks between different investment options for Afore resources. Definition of Simplified Issuer In accordance with the reform to the Securities Market Law, this definition has been introduced to broaden diversification opportunities in the portfolios managed by Siefores. This also supports the growth of the debt and capital market within the Mexican financial system. Simplified issuers are a model designed to facilitate access to equity financing for small and medium-sized enterprises.

In a context where retirement savings are crucial, these new rules offer an opportunity for workers to maximize their returns. It is key for employees to understand how these investments align with their risk profiles, especially considering that the economic landscape and investment opportunities are in constant flux. Staying informed about these changes is essential for making sound financial decisions for their future.