In 2024, investment funds in Peru experienced varied returns, with the capital preservation fund 1 yielding between 0.4% and 2.1%, while fund 0 emerged as the top performer with an average gain of 6.3%. this marks a significant decline from 2023, where fund 1 achieved an impressive 16% return. Economic factors, including rising U.S.Treasury bond yields,have complicated expectations for falling inflation and interest rates,according to Jean Pierre Fournier,investment manager at AFP Integra. Jorge Espada, managing partner at Valoro Capital, noted that while all investment assets showed interesting profitability, they fell short of last year’s performance, influenced by recent fund withdrawals and portfolio compositions.In a recent analysis of investment fund performance, it was revealed that the returns for fund 1 have significantly decreased compared to two years ago, when interest rate cuts favored fixed-income portfolios. The last quarter of 2023 saw long-term rates rise, adversely affecting bond values. Experts noted an unusual return pattern in fixed income during 2023, with rates hovering around 9%, leading to capital gains as rates began to decline. Looking ahead to 2024, the likelihood of a similar trend appears slim. Simultaneously occurring, Funds 2 and 3 have benefited from double-digit gains in stock markets, including Lima and New York, but also incorporate alternative assets that, while yielding modest returns of 3% to 7%, have provided essential protection during downturns, highlighting their long-term value.The recent withdrawals from pension funds in Peru have significantly impacted the performance of these financial portfolios, according to industry experts.Joswilb Vega, the Investment Manager at Profuturo, noted that without these withdrawals, returns would have been much higher, as funds were left with minimal exposure to liquid assets that performed well. The balanced Fund 2 was notably affected by the latest cash outflows, which Fournier described as a “huge damage” to long-term portfolio management. Additionally, Espada highlighted that the early sale of assets by pension funds to meet liquidity demands has led to devaluations of the instruments within these portfolios, raising concerns about the sustainability of retirement savings in the face of ongoing withdrawals.Investment managers are optimistic about the future of pension funds, projecting returns of up to 8% by 2025 following the cessation of AFP withdrawals.Jean Pierre Fournier from AFP Integra noted that the absence of further withdrawals will enhance portfolio management, with expected gains for funds 1, 2, and 3 aligning with historical averages. Despite potential geopolitical risks, including Donald Trump’s return to the white house, experts like Joswilb Vega from Profuturo believe that global economic growth and controlled inflation will support a positive market outlook. However, they caution about the challenges posed by regulatory instability that could threaten the financial system’s stability.In a significant move to enhance financial literacy, Diario Gestión has launched a new initiative aimed at delivering exclusive daily news updates directly to subscribers’ inboxes. This program is designed to empower business professionals with timely insights and analysis, ensuring they stay ahead in a rapidly evolving market.By registering for free, users can access curated content that not only informs but also equips them with the knowledge needed to make informed decisions. This initiative underscores the publication’s commitment to fostering a well-informed business community, making it an essential resource for those looking to thrive in today’s competitive landscape.
Investment Funds in Peru: A Q&A Discussion on 2024 Returns and future Outlook
Editor: Welcome, and thank you for joining us today to discuss the recent performance of investment funds in Peru. With so much happening in the financial markets, especially in 2024, it’s crucial to understand the implications for investors. Joining us is Jean Pierre Fournier, an investment manager at AFP Integra. let’s dive into the details!
Editor: Jean Pierre, we saw notable variability in the returns of investment funds in Peru this year. Fund 1 yielded between 0.4% and 2.1%, a stark contrast to last year’s remarkable 16% return.What do you attribute this major decline to?
Fournier: The decline is largely due to rising U.S. Treasury bond yields and the consequent effect on inflation and interest rates. In 2023, we benefited from interest rate cuts that favored fixed-income portfolios. Though, as long-term rates rose in the last quarter of that year, it adversely affected bond values, making it harder for funds relying on those assets to perform well in 2024.
Editor: Jorge Espada, managing partner at Valoro Capital, also mentioned that all investment assets showed interesting profitability this year, yet still fell short of the previous year’s performance. Can you elaborate on that?
Fournier: Absolutely. The essential issue was exacerbated by recent fund withdrawals and changes in portfolio compositions. Joswilb Vega from Profuturo pointed out that many funds ended up with minimal exposure to liquid assets that performed well as of early asset sales to meet liquidity demands. For Fund 2 in particular, these cash outflows have caused severe damage to long-term portfolio management.
Editor: it sounds like liquidity challenges have played a significant role. Has this number of withdrawals raised concerns about the sustainability of retirement savings in Peru?
Fournier: Yes, it has. The early sales of assets to satisfy cash demands have led to devaluations within these portfolios, putting pressure on long-term returns. We’re focusing on the future, however, and we’re optimistic about the potential returns, projecting gains of up to 8% by 2025 if these withdrawals slow down.
Editor: That’s an encouraging outlook. What changes need to happen for investment funds to realign with past averages?
Fournier: A significant factor will be the cessation of AFP withdrawals.If we can manage to stabilize the situation, I believe we can improve portfolio management and achieve the expected gains for funds 1, 2, and 3.
Editor: There are global influences to consider as well. With potential geopolitical risks on the horizon, such as the uncertainties surrounding Donald Trump’s possible return to the White House, how do you see these impacting the Peruvian market?
Fournier: While geopolitical risks can create a volatile environment, we need to remain focused on economic fundamentals. Global economic growth, paired with controlled inflation, should provide support. Though, we must also be cautious of regulatory instability that could pose risks to the financial system.
Editor: That’s a very balanced view, Jean Pierre. In light of these insights, what practical advice can you offer to investors looking to navigate this complex landscape?
Fournier: Investors should focus on diversification across asset classes. Those who are considering withdrawals must weigh their options carefully to avoid locking in losses. It’s essential to stay informed about market trends and the broader economic context, as knowledge is a powerful tool in making informed decisions.
Editor: Thank you for sharing your expertise, Jean Pierre. It’s clear that while challenges remain, there are also avenues for growth and recovery in the investment landscape in Peru.
Fournier: Thank you for having me. Staying informed and adaptive will be key for investors as we move forward in 2024 and beyond.