/ New Investment Regime for Chile Pension Funds (Target Date Funds) – Pension Regulator Market Consultation

Felipe Cousiño, Partner

Francisca Donoso, Senior Associate

Alessandri

Deadline: Sunday April 27, 2025

On April 17, 2025 the pension regulator (SP) published a market consultation, which seeks to gather the necessary information on the technical, methodological, and operational aspects necessary to develop the terms of reference for the bidding process for a specialized consultancy for the design of the new Chilean pension fund investment regulations called Régimen de Inversión  (“Investment Regime”) that will be applicable to the new target date funds (that will replace the current A, B, C, D and E pension fund types) and their reference portfolios (following the changes introduced by Pension Reform Law No. 21,735).

Some of the specific queries being made by the SP as part of this market consultation are:

1. What methodologies do you consider most appropriate for defining reference portfolios (benchmarks) in pension funds with different time horizons?

2. What tools and analytical models do you consider relevant for evaluating different risk-return scenarios over a long-term horizon, incorporating pension risk?

On Methodological Aspects

3. How would you address the integration of alternative asset classes (infrastructure, private equity, etc.) in the Investment Regime?

4. What approaches do you consider most appropriate for determining the strategic asset allocation in a target date funds system?

5. What factors do you consider critical for the definition of reference portfolios (benchmarks) that are both robust and practical to implement?

6. What parameters and statistics do you suggest using to evaluate the performance and risks of portfolios in the long term?

On Regulatory Aspects

7. What international references do you consider particularly relevant for Chile in terms of regulating pension fund investments, in the context of implementing target date funds?

On Risks and Mitigation

8. What approaches do you recommend for addressing and managing emerging risks (climate, technological, geopolitical, etc.)?

9. What protection and transition mechanisms do you suggest for addressing and managing the potential impacts of implementing the new regime?

The market consultation is also available on the public procurement platform, www.mercadopublico.cl, in the Market Consultations section, with the ID 3571-4-RFI25. It can also be accessed through the following link  https://consulta-mercado.mercadopublico.cl/detalle-consulta-mercado/3571-4-RFI25.

Responses will be accepted until Sunday, April 27, 2025 deadline extended to May 7, 2025. Please note that the responses received may be considered as input by the SP. Participation in the consultation does not grant any preference or advantage in the subsequent bidding process.

What is being sought by the SP

Currently, the SP is in the process of preparing tender documents/bidding guidelines, the objective of which is to obtain studies/research contracted with individuals or legal entities, local or foreign, with extensive experience that will serve as input for the construction of the new Investment Regime. This is because the pension reform introduces changes to pension fund investments that seek to generate portfolio construction with a longer-term perspective by AFPs, generate incentives for a better alignment of interests between AFPs and pension fund beneficiaries, and facilitate access to better risk/return combinations, a set of changes that the SP claims will lead to improved pensions.

Thus, the intention of the SP is that the new Investment Regime incorporate international best practices and adapts to the current needs of pension fund beneficiaries, “constituting a flexible yet robust regulatory framework that allows for adaptation to changes in the financial markets and the pension system.” In particular, a structure for the new Target Date Funds (that will replace the current A, B, C, D and E pension fund types) and their reference portfolios must be defined, as well as rewards and penalties for AFPs in relation to the performance of the pension funds they manage compared to the reference portfolios.

Instructions for registering on the public procurement portal

To participate in the consultation, interested entities or individuals, both in Chile and abroad, must be registered as suppliers on the public procurement portal www.mercadopublico.cl.

The instructions for registering are as follows:

1. Go to the link: https://www.chilecompra.cl/como-vender-al-estado/
2. Click on “INSCRÍBETE COMO PROVEEDOR DEL ESTADO” (i.e. “REGISTER AS A GOVERNMENT SUPPLIER.”)
3. If you are registering as an individual, you must have filed an application for commencement of taxable business with the Chilean tax authority (Servicio de Impuestos Internos – “SII”). If you are registering as a foreign entity, you must have a Chilean tax identification number (RUT) and obtain a tax password:Clave Tributaria. In order to do so, a notarized and apostilled power of attorney needs to be granted to a person resident in Chile, together with submitting an apostilled and translated certificate of good standing  and bylaws of the foreign entity.
4. Accept the terms and conditions, complete the required information, and click “Next.”
5. Once registered, you will be able to review business opportunities, participate in tenders, and submit quotes to all public agencies in the country. It’s important to keep in mind that, to bid in a tender process, you must be registered in the government supplier registry (Registro de Proveedores). This means meeting the qualification requirements and updating your information regularly.