Colombian AFPs go yet longer on emerging-markets equities

Colombian AFP pension managers injected USD 637 million of assets into cross-border funds and ETFs in April as they went even longer on emerging-markets equities.

The AFPs finished April with USD 17.8 billion invested in cross-border funds and ETFs, almost all of which was in equities, after having yanked USD 597 million in the first quarter.

The S&P 500 index gained 3.9% in the month, after hitting several fresh record highs amid upbeat first quarter earnings reports. That rise came on top of a first quarter gain of 13% — the index’s best first quarter in over 20 years.

In addition to broader stock gains that encouraged investors to plunge back into equities, a regulatory change in Colombia could be nudging pension savings into stocks.

Since March, money from younger and undecided Colombian pension clients has been routed straight into aggressive risk portfolios rather than automatically placed into moderate-risk portfolios. This could be shifting more Colombian pension savings into equities.

Emerging-markets equity rules

The AFPs pulled USD 56 million from money-market funds in April, leaving them with just USD 105 million still in those conservative investments.

At the same time, AFPs injected USD 296 million into emerging-markets equity funds, bringing total AUM to USD 5.3 billion. Emerging-markets equity was the AFPs’ top allocation with a 30.1% market share.

iShares Core MSCI EM IMI UCITS topped inflows in that category, with USD 212 million entering the fund. Emerging-markets-equity funds rose, on average, 1.8% in April.

In January, the US Federal Reserve signaled a pause on rate hikes. That pause was seen as positive for emerging markets assets. Investors from emerging markets themselves have been particularly inclined to view those assets with optimism.

Also, Credit Suisse noted in an April 26 note that the end-February announcement by MSCI that it would quadruple the China A inclusion factor in global indices has also led to higher exposure to emerging markets equities, and in particular Asian equities.

The AFPs returned to Asian equity funds in April, allotting USD 180 million to the category for USD 1.4 billion in total assets and an 8.1% market share. They also set aside USD 133 million for Latin American equity, raising their exposure to USD 1.1 billion, and added USD 107 million to global equity for USD 1.2 billion in AUM.

North American equities, though, continued to see reduced interest from the AFPs, despite strong index gains. The AFPs took USD 74 million out of the funds in April for USD 4.5 billion in AUM and a 25.4% market share.

Market leaders

Among top brands, iShares gained a whopping USD 951 million in April, giving it USD 8.7 billion under management and expanding its market share to 49%.

Number two Vanguard ended the month with USD 2.5 billion in AUM, USD 13 million more than in March, and a 14% market share.

State Street held onto third place after losing USD 7 million, leaving it with USD 736 billion in AUM and a 4% market share.