/ Pension Funds Precluded from Investing in Mutual Funds with Hedge Fund Strategies

22 January, 2018

Deadline for comments to draft rule expires February 9, 2018


The Chilean pension regulator (Superintendencia de Pensiones- SP) has given until 9 February 2018 for industry participants and the public in general to provide comments to the new rule that is intended to clarify a recently adopted rule (Section II.4.c of the Investment Regime of Pension Funds effective 1 November, 2017) which prohibits pension fund investments in foreign or domestic mutual funds/open ended funds and closed ended funds that “use investment strategies that correspond to hedge funds”. The terms of this prohibition have created uncertainty as to its scope and indeed have caused concerns relating to the impact they may have on highly regulated retail products such as UCITS funds or US 1940 Act mutual funds. However, the proposed clarification, instead of clearly carving out regulated funds from the prohibition, provides a list of what strategies will be considered hedge fund strategies. Thus, mutual funds whose principal investment strategy is either Equity Long Bias, Equity Long/Short, Equity Market Neutral, Fixed Income Arbitrage, Credit Long/Short or Macro, to name some of the prohibited strategies, may not in the future receive pension fund investments if this rule is approved. To add to the uncertainty, the list contains a catch all referring to any “Other Hedge Fund Strategy”.

Industry participants are urged to comment on this proposed rule.


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