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THE MEXICAN MUTUAL FUND INDUStry is hoping changes to the nation's social security system will bring it what it needs: investors. Although mutual funds, which pool the money of members to invest in a variety of securities, have been in Mexico for more than 50 years, the industry is still tiny.
Industry insiders estimate there are only about 20,000 investors with money invested in one of the nation's 264 mutual funds. According to the Mexican Stock Exchange (Bolsa), Mexico's mutual funds manage only about $70 billion pesos worth of assets (US$9.36 billion) - a minuscule portion of the US$110 billion invested in the Bolsa.
U.S. investors, on the other hand, have more than US$3 trillion in mutual funds, or about half of the US$6.34 trillion market capitalization of the New York Stock Exchange. COUNTING ON AFORES However, the landscape could soon be changing for Mexico's mutual funds. Next year, when the government's social secruity reforms come into effect, Mexican workers will have the option of moving their retirement funds from the state-run Mexican Social Security Institute (Instituto Mexcicano de Seguridad Social, IMSS) to private pension funds, or Afores.
During the first year of the new system, each Afore manager will only be allowed to operate a single debt instrument such as government bonds or Treasury Certificates (Cetes). But after that, Afores may be allowed to diversify into stocks and commodities.
And that, say some mutual fund managers, could give rise to associations between Afores and existing funds as Afores seek to take advantage of their expertise. It could also mean a cash infusion for the mutual fund industry. Fernando Ordonez manages six mutual funds worth $1.7 million pesos for the Arka brokerage house in Mexico City. "I could see some sort of alliance between mutual funds and Afores managers," he says. "But the whole...