/ 2024-2025 New Maximum TERs for Chilean Pension Fund investments
June 14, 2024Some drop, certain others rise.
Period July 1, 2024 to June 30 2025.
Felipe Cousiño
Partner
Alessandri
On June 10, 2024 the Chilean securities, banking and insurance regulator (Comisión Para El Mercado Financiero – “CMF”) published for comment the proposed new annual rule whereby it jointly sets with the Chilean pension regulator (Superintendencia de Pensiones– “SP”) the maximum fees and expenses (“Max TER”) that may be borne by Chilean pension funds. The excess over such Max TER must be borne by the pension fund managers (“AFPs”).
As may be noted in the chart below, some Max TERs are raised and others are lowered. Indeed, in the case of equity mutual funds the rates are either lowered or remain the same, whereas they are raised in the case of money market funds and certain other fixed income funds.
ETF rates are raised in the case of developed markets and global equity ETFs as well as in the case of emerging markets debt ETFs. Rates for other ETF types remain unchanged. No distinction continues to be made between actively managed and passive ETFs.
The Max TER for private equity (PE) is raised from 2.25% to 2.35%, but the one for private credit (PC) is slightly reduced and put on a par with PE. The explanation for the latter was that there was a comparatively low amount of data for PC funds in the Preqin date base used by the regulators to fix the new Max TERs. Likewise Max TERs for funds of funds were brought down to 3,75%.
On a related note, Chilean feeder fund fee reporting requirements will now be subject to the same reporting standard that sponsors receiving direct investments (i.e the ILPA standard) are subject to.
In other respects, there were no changes, meaning that the same updated data bases (Morningstar for registered funds and Preqin for private equity and private credit) were used to calculate the Max TERs, and the same percentiles were used for the statistical methodology to determine which funds to consider within the relevant data bases.
The following is a chart showing the old and the new (proposed) Max TERs:
| Foreign and domestic mutual funds and domestic Closed-End Funds (transferable) | ||||
|---|---|---|---|---|
| Asset type | Geographical Zone | Business style | Old Maximum TER | New Max TER |
| Stocks | Developed, Emerging and | Index | 0.31% | 0.30% |
| Global | ||||
| Developed and Global | Others | 0.99% | 0.99% | |
| Emerging | Others | 1.19% | 1.18% | |
| Bonds | Developed | Index | 0.11% | 0.11% |
| High Yield | 0.80% | 0.80% | ||
| Others | 0.62% | 0.63% | ||
| Emerging | 0.94% | 0.95% | ||
| Global | 0.71% | 0.71% | ||
| Balanced | 0.97% | 0.97% | ||
| Liquidity | 0.17% | 0.21% | ||
| Exchange Traded Funds (ETF) | ||||
| Asset type | Geographical Zone | Business style | Old Maximum TER | New Max TER |
| Equity | Developed and Global | 0.60% | 0.60% | |
| Emerging | 0,69% | 0.72% | ||
| Bonds | Developed and Global | Others | 0.38% | 0.39% |
| Emerging | 0.50% | 0.50% | ||
| Developed and Global | High Yield | 0.50% | 0.50% | |
| Alternative Assets | ||||
| Investment type | Old Maximum TER | New Maximum TER | ||
| Private Equity (includes co-investment) | 2.25% | 2,35% | ||
| Private Debt (includes co-investment) | 2.36% | 2.35% | ||
| Private Equity Funds of Funds | 3.87% | 3.75% | ||
| Private Debt Funds of Funds | 3.97% | 3,75% | ||
| Domestic Closed-End Real Estate and Infrastructure Funds | 2.00% | 2,00% | ||
| Gold ETFs | 0.88% | 0,93% | ||
If you need more information, please do not hesitate to contact our capital markets team.