Colombian AFPs boosted cross-border equity positions in August

Colombian AFP pension managers removed USD 534 million from cross-border money-market funds in August as they plunged USD 657 million back into North America equity.

Outflows from cross-border funds and ETFs totaled USD 210 million in the month.

The renewed bets on North America came amid extremely choppy trading, driven primarily by an escalation in US-China trade relations and signals of recession from the bond market.

The S&P 500 lost nearly 2% in August and logged in its worst monthly performance since May, when it dropped 6.6%.

The yield curve on two-year and 10-year US Treasury notes inverted in August, sending shivers through the investment community, which interpreted the inversions as a sign of impending recession.

Credit Suisse says it’s skeptical that the inversions are harbingers of difficult times ahead because they come as the US Federal Reserve adjusts monetary policy.

“In our opinion if the yield curve ever were not going to work it is now,” the bank cautioned in a Aug. 15 note, adding that it believes the Fed will be aggressive to reverse the inversion with inflation undershooting its targets and the Fed emphasizing the interconnectivity of global growth. 

The AFPs finished August with USD 16.4 billion invested in cross-border funds and ETFs, almost all of which was in equity funds. They increased their total equity exposure by USD 320 million during the month.

Exit from money markets 

The AFPs reduced their holdings of money-market funds in August to just USD 118 million after having deepened exposure in July.

The sales mostly came from JPM US Dollar Liquidity  – Institutional Dist and BGF ICS USD Liquidity $ Inc — the same funds that saw strong inflows in July.

The AFPs also lightened their holdings of emerging-markets equity, one of their top allocations, by USD 267 million to USD 4.3 billion of AUM in August.

iShares MSCI Emerging Markets topped outflows for that category, with USD 320 million coming out of the fund. Emerging-markets-equity funds posted an average negative return in August of 4.4%.

Emerging-markets equity accounted for 26.5% of the AFPs’ cross-border investments in the month.

Equity a mixed bag

At the same time, the AFPs raised their exposure to North American equity to USD 4.7 billion. The category accounted for 29% of Colombian AFP assets in cross-border funds and ETFs by the end of the month. 

iShares Core S&P 500 led inflows for North America funds, with USD 363 million coming into the fund for USD 1.9 billion under management. North America equity funds returned, on average, negative 2% in August.

Among smaller allocations, Latin America equity funds gained USD 34 million to USD 1.1 billion in AUM, Asia equity funds shed USD 46 million for USD 1.2 billion in AUM and Europe equity lost USD 79 million for USD 1.6 billion under management.

Market leaders

Among top brands, iShares gained USD 289 million in August, giving it USD 8.2 billion under management and a 50% market share with the AFPs.

Number two Vanguard ended the month with USD 2 billion in AUM, USD 311 million less than in July, and a 12% market share.

State Street recovered third place in a tight race with Morgan Stanley and JP Morgan after adding USD 336 million, for USD 754 million in AUM and a 4% market share.