Peru Increases Cap on Pension Investment Internationally

(July 16, 2010) — Peru’s central bank upped the limit today on how much private pension funds can invest abroad to 28% from 26% previously, allowing funds to invest an additional $500 million in foreign markets.

Alejandro Perez-Reyes, investment manager at Peru’s second-largest private pension fund AFP Prima, told Bloomberg that funds may additionally ask Congress to alter a law that set a 30% cap on the amount that private pension funds can invest in foreign markets.

“We need to diversify our investments, as it’s risky to have everything in the same basket,” Perez-Reyes, who oversees $7.8 billion, told the news service. “The bank will raise the limit as soon as we’re near the current ceiling,” he added.

Peru’s four pension funds have to date invested 23.6% of their portfolio abroad, mainly in stocks, according to Bloomberg.

The country’s private pensions, which have been developing steadily in Peru partly by taking advantage of strong local markets, set a lofty goal of doubling the volume of their assets under management over the next six years. The assets managed by the four companies that operate in the system are expected to hit $50 billion by 2016, up from the current $26 billion.

In related news, Peru’s economy expanded at the second-fastest pace in 19 months in May, boosted by a recovery in private investment, with output growing 9.2% in May from the same month a year earlier.