The Social Security Research, Study and Development Corporation (Ciedess), dependent on the Chilean Chamber of Construction (CChC), issued a bulletin on Tuesday, reporting that all pension multifunds posted negative returns in December. Meanwhile, funds A, B and C were the second worst performers.
In December (with share values at 25), the riskiest funds, A and B, recorded losses of -4.04% and -2.76% respectively, while fund C, with moderate risk, presented a drop of -1.56% . For their part, the more conservative funds, D and E, achieved reductions of -0.67% and -0.25% respectively.
“The monthly result of multifunds A and B was influenced by the poor results of international equities and by the strong depreciation of the dollar; while at the local level there is a slight decline in the IPSA. The profitability of funds C, D and E, on the other hand, is mainly explained by the results of investments in local debt securities, as well as by the performance of foreign fixed-income instruments”, explained the consultant.
A, B and C: second worst performance
According to Ciedess, so far in 2022, between January and December, the riskiest funds, A and B, have recorded losses of -20.49% and -15.66% respectively; while fund C, with moderate risk, shows a decline of -9.22%. For their part, the more conservative funds, D and E, achieved gains of 0.35% and 7.38%.
“Since the creation of the multi-funds, these results would represent the second worst cumulative performance for funds A, B and C, after the losses recorded in 2008 in the context of the subprime crisis; while for fund E it would be the third best historical performance, after the returns of 2009 and 2019,” said the consultant.
Reasons for poor performance
According to Ciedess, the annual result of multi-funds A, B and C is mainly explained by the variations in the prices of variable income instruments and the dollar. “Negative results are observed in the main international indices, partially offset by the appreciation of the dollar; while locally there is a significant increase in IPSA,” they indicated.
In detail, the markets suffered from the pandemic, the Russia-Ukraine conflict, the fight against persistent inflation and fears of a global recession. In this regard, the historical increases in interest rates in several countries stand out, especially in the United States and Europe.
China, for its part, has suffered from the severe restrictions in the context of the pandemic, the crisis in its real estate sector and the decline in its economic growth projections.
Results of funds D and E
In the case of conservative funds, D and E, Ciedess said the results of investments in local debt securities and the performance of foreign fixed income instruments had an impact.
“Internationally, international fixed income has a negative contribution; while locally there is a significant drop in interest rates for fixed income instruments, with a positive impact on conservative funds through capital gains,” said the adviser.
The study center also commented that “the latter is mainly due to what happened in November, in the context of a CPI much lower than expected, representing a turning point in the trend observed throughout the year and reducing the future projections of the ‘inflation”.