Under Colombian regulations, pension fund administrators
(PFAs) are subject to a strict investment regime, in order to
protect the savings of pensioners and affiliated employees.
Although PFAs are authorised to invest in foreign
securities-related products, the PFA investment regime sets out
various restrictions on the asset classes that are suitable for
investments. PFAs must also comply with specific requirements
to qualify as an admissible investment option.
Although the PFA investment regime adopts a conservative
approach, recently enacted regulations have broadened the range
of asset classes in which PFAs can invest. On May 6 2016, the
Colombian Ministry of Finance issued Decree 765, which
re-classifies alternative assets as an admissible investment
Colombian legislation now acknowledges that alternative
assets can provide appropriate investment opportunities that
guarantee the required investment returns to maintain the value
of the savings entrusted to PFAs.
Decree 765 increases the maximum amount that PFAs can invest
in securities-related products and a new global limit of 20%
– or 25% for high risk funds – of the total
assets under management was created. Securities-related
products include: foreign collective investment schemes that
invest in commodities and currencies; hedge funds or similar
collective investment schemes with equivalent supervision and
regulatory standards; and, collective investment schemes or
funds that invest in real estate assets, such as real estate
investment trusts (REITs).
In addition to the general requirements for foreign
securities-related products, these alternative assets and their
offshore managers must meet certain conditions to qualify as a
suitable investment opportunity under the PFA regime. For
example, they must have at least $100 million in assets under
management and their financial statements must be audited on a
yearly basis by an auditing firm with recognised expertise.
Decree 765 also sets out the maximum exposure that a single PFA
can have in each of these asset classes, and the concentration
limits per investment product.
Decree 765 certainly widens the investment opportunities for
Colombian PFAs, opening up new possibilities for portfolio
Luis Gabriel Morcillo-Méndez and Alejandro