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Itau Chile Reports Fall in Value of Short-Term Fund Assets

Dec. 21 (Bloomberg) -- Itau Chile Administradora General de Fondos SA, a unit of Brazil’s Itau Unibanco Holding SA, is changing the way it values five short-term fixed-income mutual funds after “significant declines” in the investments.

The company will start valuing the assets in the funds at market rates, it said in a statement to the securities regulator today. The funds affected all invest in debt with maturities of less than 90 days, yields of which have climbed in Chile in the past month.

Itau is among at least seven fund managers in Chile to have announced a similar change today, including the local fund management units of ING Groep NV and Banco Bilbao Vizacaya Argentaria SA. Chilean rules allow funds that invest in short-term securities to value their assets using the yield they were bought at unless the difference between that method and the market price is greater than 0.1 percent of the portfolio’s value.

“During the last few weeks, the term deposits market has been experiencing a substantial rise in interest rates and a tightening of liquidity, a situation that escalated yesterday,” Itau said in an e-mailed statement. “The degree of variation surpassed regulatory limits.”

The company made no changes in the methodologies it uses to mark securities to market, it said.

Money-market funds managed by 13 Chilean asset managers posted losses of at least 0.1 percent yesterday, according to data from the country’s mutual fund association.

“Money market funds are valued at purchase value and there are minimum standards for the deviations between portfolio value and market value,” said Macarena Ossa, planning and development manager at the Chilean mutual funds association. “All the fund managers follow a process when that happens and they shift to mark-to-market.”

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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