Chile Pension Regulator Sets Limit on Swaps That Boosted Returns

Chile’s pension regulator set new risk-based rules limiting the use of derivatives by pension funds known as AFPs, tightening their scrutiny after foreign interest rate positions helped buttress returns but led to concerns about potential financial strain.

Two new limits are imposed, according to a press release, one on the potential exposure of their positions and another on the liquidity the funds have available to pay any potential margin calls. The maximum exposure will be 3% for the pension fund type A and B, 2.5% for fund type C, and 2% for type D and E funds.