On June 22, 2017, the Superintendence of Pensions placed the resolutions that intend to amend the investment regimes of Pension Funds and Unemployment Funds for public consultation (jointly, the "Resolution"). The Resolution intends to adapt the Investment Regime of Pension Funds and Unemployment Funds in consideration to the reforms introduced in October 2016 by Law No. 20,956, titled "Law for the Impulse of Productivity", which incorporated a series of amendments to various laws, with the purpose of increasing the country's productivity, amending (among other provisions) article 45 of Law Decree No. 3,500 applicable to the Pensions System, which regulates the instruments in which Pension Fund Administrators ("AFP") and Unemployment Fund Administrators ("AFC") can invest the funds that they manage.
The changes introduced by the Resolution have the main purpose of achieving a greater diversification of the investments of the funds, allowing a better access to risk and return combinations, improve yield, allow for long-term investments and direct investments in a greater variety of alternative assets, with potential savings in costs for Pension and Unemployment Funds. Said amendments would allow investing in non-liquid assets that are not frequently traded in the formal markets.
New eligible instruments
The Resolution establishes six new classes of alternative assets that are subject of investment by the Pension Funds and Solidarity Unemployment Funds:
Vehicles to invest in foreign private capital assets (including Limited Partnerships (LP), Limited Liability Companies (LLC) and other similar vehicles). Vehicles to invest in foreign private debt (including Limited Partnerships (LP), Limited Liability Companies (LLC) and other similar vehicles). Overseas co-investment in private capital and private debt. Shares of closely held local corporations, such as shares in infrastructure concessionaire companies and real estate companies. Endorsable non-residential mortgage loans. Non-residential real estate properties subject to lease agreements with purchase option. The Resolution specifies that resources of the Unemployment Fund (a fund that is different from the Solidarity Unemployment Fund) may not be invested in the abovementioned alternative assets.
Requirements to invest in alternative assets
Along with authorizing investments in these alternative assets, the Resolution establishes several conditions applicable to Pension Funds so that they may invest...