A measure that seeks to reduce the commissions collected by Mexican private pension administrators, also known as afores, is credit positive for these local fund managers, Moody's said.
The rating agency expects the plan to be laid out "in an orderly manner" over four years and not to impact afores' profitability, which will be supported by sustained growth in assets under management. Pension fund managers' AUM expanded at a compound annual rate of 13.7% between July 2009 and July 2019, anchoring their revenues despite a 70-basis-point decline in fees over the same period, the rating agency noted.
Moody's said that the measure lays out clear rules on future fee cuts and a standardized benchmark that considers, among other factors, average fees charged in contribution systems of member countries of the Organisation of Economic Co-operation and Development as well as those of Mexico's regional peers.
Furthermore, improved efficiency through synergies and technology will temper increases in afores' operating costs, Moody's noted.
The country's four largest afores — Afore XXI-Banorte SA de CV, Afore Banamex SA de CV, Afore SURA SA de C.V. and Profuturo Afore SA De CV — are the most capable of limiting the effects of the fee changes, while smaller pension fund managers will struggle more in dealing with the new measure, Moody's said.
The Mexican government expects the new measure to result in a 100 billion-peso cut in afores' commissions, equivalent to a 10% increase in a single retiree's pension.
As of Sept. 2, US$1 was equivalent to 20.11 Mexican pesos.
