PERU - Prima AFP, Peru's biggest pension fund manager, is taking advantage of the biggest stock selloff in more than two years and declines in the country's bonds and currency to buy assets on a bet prices will rebound after presidential elections.
Stocks are undervalued after the country's benchmark index plunged 8.9% last week following candidate Ollanta Humala's victory in the first-round ballot, said Alejandro Perez-Reyes, head of investments at the Lima-based company.
Foreign investors have fled Peruvian securities on concern that a Humala victory may stunt economic growth and sap profits in the mining and energy industries, Perez-Reyes said.
"Being long-term investors in a market with good perspectives and some nervousness is actually a good position to be in," Perez-Reyes said. "You take a short-term hit and then go out and buy positions at very interesting prices."
Prima, which has 26% of its 26.5bn soles ($9.38bn) in assets in Peruvian stocks, sold shares and bet against the sol before the April 10 first-round vote as it anticipated the drop in asset values, Perez-Reyes said in an interview in Lima yesterday. The Lima General Index has dropped 9.5% in the past month, the fourth-biggest slide among 90 primary indices tracked by Bloomberg, on concern Humala, a one- time ally of Venezuelan President Hugo Chavez, will win the June runoff vote and prompt international companies to pare planned investment projects worth $50bn.
Prima is now "selectively" buying stocks as it expects private investment and consumer demand to keep fueling Latin America's fastest-growing economy regardless of who wins the ballot, Perez-Reyes said. Investors will probably overreact to the first opinion poll on the election runoff, due for release April 24, as well as the final vote, whoever wins, Perez-Reyes said. This may create more buying opportunities, he said.
Investors are concerned Peru's next president may seek "radical" changes to economic policies, such as nationalizing companies or scrapping free-trade agreements the government expects will double Peru's exports to $70bn within five years, he said.
"It's not a question of who wins the elections but what policies are implemented," Perez-Reyes said. "There is a chance of a big shift in economic policy that could change fundamentals. We hope that's not going to be the case."
Prima's net return on assets fell to 9% in the 12 months through March, from 9.7% a year earlier, and was the lowest among the nation's four private pension fund managers, according to the country's pension regulator.
Peru's four private pension fund managers invested more of their 84.3bn soles in assets abroad last month as domestic securities declined. The funds had 29% of assets invested overseas last month, compared with 27% a month earlier and 22% in March last year, according to the regulator.
The central bank increased the limit on pension funds' overseas investments four times last year to 30% of their assets from 22% in 2009 to help cool demand for soles as exports jumped 35% and central bank policy makers raised borrowing costs to cool inflation.
Railways Pension Trustee Company chief executive Phil Willcock has quit the scheme after only 10 months to take up a position as head of AIG UK Life.
The Financial Conduct Authority (FCA) has launched a consultation on how to enable defined contribution (DC) savers to invest in patient capital via unit-linked funds.
The Pension Protection Fund has published its final levy rules for 2019/20 following a consultation launched in September.
The Competition and Markets Authority's (CMA) final report on the investment consultant market has been celebrated as having "real teeth" to produce better outcomes for members.