In October, Multifunds Experience Losses and Continue Yearly Downtrend
6 NOV, 2023
October was an unfavorable month for pension multifunds.
In addition to persistent inflationary pressures and high global interest rates causing instability in global markets, two additional factors played a role: the conflict between Israel and Hamas and a more restrictive stance by the United States Federal Reserve (FED). This resulted in a negative impact on pension funds.
According to the Ciedess report, the riskier funds A and B recorded variations of -3.70% and -3.25%, respectively, while the moderate-risk Fund C experienced a decline of -3.35%. Meanwhile, the more conservative funds D and E incurred losses of -3.94% and -4.10%, respectively.
According to Ciedess's analysis, the poor performance of Funds A, B, and C in October was primarily due to fluctuations in the prices of equity instruments.
"Internationally, major indices had negative results, partially offset by an increase in the value of the dollar, while domestically, there was a decrease in the IPSA index."
Ciedess
As explained by the consultancy, "In October, the markets were not only affected by the conflict between Russia and Ukraine, tensions between the United States and China, possible changes in interest rates by major central banks, and fears of a global recession, but also by the start of the conflict between Israel and Hamas and its potential escalation, the maintenance of high rates by the United States, and the real estate market crisis in Chile."
On the other hand, the profitability of Funds D and E, according to the consultancy, was influenced by the results of investments in local debt securities and the performance of foreign fixed-income instruments. "Internationally, there was a decrease in foreign fixed-income assets, while domestically, there was an increase in interest rates on fixed-income instruments, which had a negative impact on conservative funds through capital losses."
Ciedess noted that this was due to "a smaller-than-expected cut in the Monetary Policy Rate (TPM) and an increase in international reference rates, and more recently, the issuance of bonds by the Ministry of Finance in October, which pushed up local rates, combined with the revision of Chile's credit rating outlook from 'stable' to 'negative' by S&P."
Worse Annual Performance
The annual figures are also not encouraging. According to Ciedess, in the year 2023 (from January to October), all multifunds have recorded negative results. Funds A and B have losses of -0.83% and -1.94%, respectively, while Fund C has seen a decline of -5.51%. Meanwhile, the more conservative funds have suffered losses of -10.13% for Type D and -11.72% for Type E.
"The result for Fund D is the third-worst cumulative performance in a year, after the losses recorded in 2008 and 2021 (-9.64% and -13.40%, respectively). As for Fund E, it is the second-worst result after the losses in 2021 (-17.39%)"
Ciedess
