Mexico $121 Billion Pension Funds Can Invest in Commodities

Mexico’s pension funds, the nation’s largest institutional investors, will be allowed to invest in most commodity-linked securities starting June 20 as regulators seek to allow them to diversify investments.

The pension funds, known as Afores, will be able to invest in commodity futures, options and swaps contracts, Mexico’s central bank said in guidelines published in today’s official gazette. About $9 billion in pension assets will be eligible to invest in commodities, according to Bloomberg calculations.

Mexican pension funds, with 1.68 trillion pesos ($121 billion) under management, have been able since December to invest from 5 to 10 percent of some portfolios for younger workers in commodity-linked securities. The Afores had mostly allocated their holdings to the country’s debt markets.

Afore Banamex, Mexico’s largest pension fund, plans to “gradually” invest as much as 2 percent of total assets in commodities, said Luis Sayeg, the chief executive officer of the bank’s pension unit. The fund will hire a third-party asset manager for such investments, he said in a June 11 interview.

Mexico’s central bank authorized investments for commodities from milk to oil. The Afores will also be able to invest in indexes linked to such securities, the gazette said.

Afore Banamex manages 289 billion pesos ($22.5 billion), according to data from the country’s pension regulator.

Barclays Plc (BARC), BlackRock Inc. (BLK), Schroders Plc and Deutsche Bank AG (DBK) are among asset managers that were waiting for the final guidelines to enter formal talks with different Afores.

-- With assistance from Jonathan Levin and Ben Bain in Mexico City. Editors: Dale Crofts, Robin Saponar

To contact the reporter on this story: Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net.

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net