BlackRock has published a research report about pension funds in Mexico, a report produced as part of its broader research project looking into the state of the pension fund industry around the globe. It shows that the cause of alternatrive investments as a group is the cause of diversification for institutional investrors whose long-tailed liabilities impose upon them long temporal horizons.

The Mexico report explains that the country’s Administradoras de Fondos Para el Retiro (AFOREs) operate in a regulatory environment more restrictive than that in many other countries, including other Latin American countries. It compares unfavorably, in particular, with Chile.

Chile introduced private pension fund management in 1981. In this millennium Chile has liberalized its rules for how these pension managers could run their business in several waves: in 2002, 2004, and again in 2008. These restrictions had the desired result; they boosted returns and allowed for a decline of administrative fees.

The managers of the Mexican AFOREs are unhappy with the restrictions imposed by the country’s Comisión Nacional del Sistema de Ahorro para el Retiro (CONSAR) especially as they related to investment outside of the country, because they believe that “international diversification is fundamental in reducing portfolio risk.”

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