Presentacin de PowerPoint

1
MULTIFUNDS
2
MULTIFUNDS

• Agenda
• Objectives and Characteristics
• Results
• Effects on the Pension System and Capital Market

3
Objectives and Characteristics
Since August 2002, the AFPs have been offering
five Pension Fund options for investing social
security savings. This is known as the Multifund
system.

• Objectives
• To give members greater flexibility and
  participation in building their pensions and make
  more options available to them for investing
  their social security savings, in order to
  increase the amount of their future pensions.

4

• Number of Members by Age

5 gt 55 years
53 lt 35 years
42 36 and 55 years
Fund B
Fund C
Fund D
5

• Number of Contributors by Age

5 gt 55 years
48 lt 35 years
47 36and 55 years
Fund B
Fund C
Fund D
6
Objectives and Characteristics (Cont....)

• 5 Funds with differing risk-return combinations.
• The Funds are differentiated by the minimum and
  maximum of equity securities.

7
Objectives and Characteristics (Cont....)

• Members may choose freely between 5 Funds when
  investing their mandatory savings, except that
• Male and Female Members who are within 10 years
  of retirement cannot choose Fund A (maximum 80
  in equities)
• Members who are already pensioners cannot choose
  funds A and B
• (maximum. 80 and 60 in equities,
  respectively).

8
Objectives and Characteristics (Cont....)

• Allocation where no choice is made
• Members who did not choose funds when the Funds
  were created or when they enrolled in the System,
  between August and October 3003, were allocated
  by Law to a fund, according to their age, in the
  following way

Men up to 35 years
Men from 36 to 55 years
Men over 56 years
Prog. Withdrawal
Women up to 35 years
Women from 36 to 50 years
Women over 51 years
Pensioners
Fund A
Fund B
Fund C
Fund D
Fund E
9
Objective and Characteristics (Cont....)

• Initial Allocation
• Those who do not choose will be allocated by age
  within a period of one year, with two transfers,
  each of 50 of their balance
• Ongoing Allocation due to Change in Age-Band
• Gradual allocation of members who never choose
  Funds by transferring 20 of their balances per
  year over a 4-year period.

10
Objectives and Characteristics (Cont....)

• Each worker will be able to transfer freely
  between the Funds. It is possible to change
  twice a year, free of charge
• The structure and value of commissions will be
  the same for all types of Fund within a single
  AFP
• The AFPs and members are allowed to sign
  contracts to place funds in 2 Funds and arrange
  future fund transfers.

11

• Objectives and Characteristics (Cont....)

• The type of fund selected in each of the members
  accounts may be the same or different.
• Mandatory Individual Capitalization Account (
  Compensation)
• Voluntary Individual Capitalization Account
• Voluntary Savings Account
• Agreed Deposits

12
Objectives and Characteristics (Cont....)

• What to consider when choosing a fund
• Age or years to retirement
• Personal preferences
• Other income

13

• Simulation of Historic Returns of Multifunds
  (January 1990- December 2001)

 
Source AFP Summa Bansander
14
Results of the Multifunds(March 2005)

• Elección de Afiliados y Pensionados (Ny ) (1)
• Fondo A 401.150 23
• Fondo B 586.262 33
• Fondo C 598.418 34
• Fondo D 92.592 5
• Fondo E .______ 76.860 5
• TOTAL 1.757.102 (2) 100

(1) Choice for the Individual Capitalization
Account.
15

• Results of the Multifunds(March 2005)

• Distribution of the Funds (US and ) ()
• Fondo A US 6.037,08 millones 10
• Fondo B US 12.660,67 21
• Fondo C US 31.277,77 52
• Fondo D US 8.219,84 14
• Fondo E US 1.626,62 3
• TOTAL US 59.821,98 millones 100

() Funds include balances from the Individual
Capitalization Account, Voluntary Contributions,
Agreed Deposits, Voluntary Savings Account and
Compensation Savings Account.
16

• Results of the Multifunds

• YEAR 2004 Sept.02 Dec.04
• Fondo A 12,86 17,85
• Fondo B 10,26 11,47
• Fondo C 8,86 8,30
• Fondo D 6,80 6,62
• Fondo E 5,44 3,39

Annual Average
Source Superintendency of AFPs
17

• Effects on the Pension System and Capital Market

• Better pensions
• Better allocation of resources
• Greater participation on the part of members
• Greater incentives to seek information
• Improvement in the services provided by the AFPs

18

• Impact on the Capital Market

• This will depend on the following variables

• Members interest in Funds A and B
• The speed with which the intention to change is
  actually implemented
• The of use given to the range of investment in
  equity securities
• The of use given to the margin of investment
  abroad (fixed income and equity securities)

19

• Impact on the Capital Market (Cont....)

• Estimates from the industry indicate that in the
  medium term about US 3,500 million will be
  transferred from fixed income instruments to
  equity securities
• The larger share will go into foreign equity
  securities
• The local market will receive investments
  depending on market and liquidity conditions and
  the development of the stock exchange. (ACD)
• Decrease in placement of time deposits (19 of
  the P.F. at present).

20

• Impact for the AFPs

• Adapt and Inform ...
• Reinforce and restructure the Investment Area
• Redefine the decision-making process
• Decide on the to be invested in equities in
  each type of Fund
• Define criteria to eliminate conflicts of
  interest between Funds

21

• Impact for the AFPs (Cont....)

• Adapt and Inform ...
• Define criteria for distributing current assets
  between the different Funds (liquidity, risk,
  duration, etc)
• Adapt the systems of information and operation
  control
• Training of service and sales personnel (ADVISORY
  SERVICES)

22

• Impact for Members

• Find out and take action ....
• Get to know and understand the various
  alternatives on offer, seeking advice
• Select the most suitable alternative for your
  personal characteristics
• Take action according to your own evaluation
• Watch for results and demand information from
  your AFP

23

• Impact for Members (Cont....)

• Find out and take action ....
• Check your decision periodically about whether to
  stay in one type of Fund or change to another
• Take well-founded decisions, thinking in terms of
  a medium and long-term outlook