Chilean regulators opened an investigation into all seven of the country’s pension funds following heavy losses in the system’s most conservative funds.
The pension regulator said Tuesday it will probe whether the AFPs, as the fund managers are known, failed in their fiduciary duty to safeguard retirement savings. The proceedings follow a review of the investment decisions behind the losses.
“It is the people here who have suffered a loss, and we want to determine whether that loss was a consequence of the inherent nature of investment management or whether there was carelessness, negligence or reckless conduct on the part of the AFPs,” Finance Minister Jorge Quiroz told reporters following the regulator’s announcement.
The probe marks an escalation in the fallout from the AFPs’ massive bets on declining US interest rates, which backfired recently as Treasury yields surged. The positions have contributed to losses of 10.4% this year in the E fund — which is geared toward more conservative investments and older savers — and had already prompted the regulator to impose new limits on derivatives exposure.
“Administrators must take all necessary steps to safeguard adequate returns and security in the investments of the funds they manage,” the regulator said in a statement.
Along with backing the regulator’s decision, Quiroz said the government had been examining the issue for several days, but that it was too early to draw conclusions. He added that the pension regulator was the appropriate authority to investigate the matter and should impose sanctions if its findings warrant them.
Meanwhile, the Senate labor committee will hear from the pension regulator and the head of the AFP association on November 4 to discuss the investment decisions and losses affecting the E fund.
The AFPs are also facing legal challenges from members over the losses. Two people have filed separate protection appeals against AFP Capital and AFP UNO over their funds’ performance, local media outlet Diario Financiero reported.
The regulator said the AFPs’ responsibilities include “safeguarding pension fund assets, detecting and avoiding conflicts of interest, and incorporating standards of diligence as key elements of their activities.”
Written by: Carolina Gonzalez @Bloomberg
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