The 11 Mexican public retirement funds managers, also known as Afores had commision based revenues of 26,817 million pesos in 2015, which is equivalent to $1,554.61 million (considering 17.25 pesos per dollar, the rate at the end of 2015). According to official figures published on regulator’s website, consar.gob.mx, this amount represents 1.06% of the resources administered at year end, reflecting growth of 5.2% in 2015, slightly higher than the previous year’s 4.7%.
Meanwhile, net income of the 11 Afores stood at 8,898 million pesos or $516 million with a negative growth of -2% (in pesos) over the previous year. Interestingly, in 2014 the growth in this category was 13%, which shows how complicated was the year that just ended; because while in 2014 the peso-denominated assets grew 15.7%, in 2015 growth was of only 7.1%. Assets under management of Afores ended the year at 148,300 million dollars. It is important to highlight that current comparisons are made in pesos, as these companies produce pesos, and given that the currency depreciation of 17% in 2015 distorts the figures if looked at in dollars.
The afore business requires economies of scale. They need a significant investment in systems to handle a large number of customers (53.6 million workers) and thus must be efficient in their operation; as well as having the ability to bring new customers and retain affiliated workers. Regardless of size, all are interested in having more customers, however the incentive is greater for small and medium ones.
Breaking up the fee income, 40% corresponds to operating costs; 26% to membership and transfer costs; 17% is administrative overhead; 7% cash operating costs of operating personnel and service workers; 4% regulatory costs; and 3% cash operating costs for investment and risk management.
One point that the CONSAR has done much emphasis on recently, refers to expenditure by the Afores for membership and transfer which has gone from 31% of fee’s income in 2014 to 26% in 2015. Afore Pensionissste with a 13% expenditure is the afore with the lowest cost of membership and transfer; however it is important to mention that is also the afore with the lowest number of promoters. Afore XXI Banorte, Banamex and Coppel spent 21% of their fee’s income in promotion; while Profuturo spent 34%, Invercap 42% and MetLife 48%.
For the 11 Afores on the market the main challenge is to grow their income at a larger rate than the drop in commissions every year. During 2015 only 6 Afores succeeded in doing so.
Column by Arturo Hanono