Mexico Pensions to Double PE Exposure | Chief Investment Officer

(August 13, 2010) — After allotting roughly $460 million with real estate and debt funds this month, Mexican private pensions are on their way to more than doubling their investment in private equity in 2010.

According to Reuters, the 14 pension funds, or Afores, may allocate 8% of their approximately $100 billion in assets to capital development certificates (CKDs) as a vehicle for Afores to make private equity bets.

In 2009, Afores purchased about $1 billion worth of new certificates through a variety of deals, and a multitude of new private equity deals are on the radar as Mexico’s pensions aim to increase returns, Reuters reported. Last month, Mexico’s private pensions announced putting $600 million into three private equity funds to help finance warehouses, distribution centers and other industrial real estate projects that provide higher returns. This month alone, Mexican airport tycoon Fernando Chico Pardo raised $200 million to finance his private equity fund, Promecap. Meanwhile, AMB Property Corp. launched a real estate fund with $260 million of pension cash.

While meeting the expanding demands of an aging population, Mexican President Felipe Calderon wants the Afores to additionally help finance roads, ports and other infrastructure projects.

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Afores, or companies authorized to manage pensions, are currently Mexico’s largest institutional investors.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Hedge fund managers, which now account for one-fifth of all trading volume in the US Treasury bond market, are refocusing their attention on more liquid products, a new study by Greenwich Associates confirms.

(August 13. 2010) — Hedge fund managers are rebounding in US fixed-income markets, Greenwich Associates reports.

The study shows that hedge fund trading volume in US government bonds has boomed in the past year. The results show an estimated 36% increase in trading volume in US fixed-income markets between April 30, 2009, and April 30, 2010.

Over the last year, hedge funds have been focusing their attention on more liquid products, highlighting a change in investment strategy. According to Greenwich Associates, the most obvious example of this shift is in US Treasuries — hedge fund trading volume in government bonds increased by approximately 73% from 2009 to 2010. While hedge funds generated about 3% of trading in this market in 2009, that share jumped to roughly 20% in 2010, Greenwich Associates said.

The growth illustrates that hedge funds remain key players in US fixed-income markets despite the fact they are far from the dominant force they were in 2006–2007, the survey stated. At their pre-crisis peak in April 30, 2007, hedge funds generated 29% of US fixed-income trading volume, a percentage that dropped to 12% by April 30, 2009, rebounding to 19% by April 30, 2010. The financial crisis has motivated investors to push to be allowed to withdraw money more easily during periods of market stress. Consequently, funds may have to keep more securities that can be sold quickly, with Treasurys and agencies being among the most liquid.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742