Regulator publishes proposed new maximum fees to be paid by Pension Funds in Chile

Felipe Cousiño,  June 26, 2024

Alessandri - On 10 June 2024, Chile’s Financial Market Commission (CMF) published for comment the proposed new annual rule establishing jointly with the Superintendency of Pensions (SP) the maximum fees and expenses ("maximum TER") that can be borne by Chilean pension funds. The excess over the maximum TER must be borne by the pension fund administrators ("AFPs").

Some maximum TERs are raised, others are lowered. (Period from 1 July 2024 to 30 June 2025)

Indeed, in the case of equity mutual funds, the percentages go down or remain the same, while they go up in the case of money market funds and some other fixed income funds.

The percentages for ETFs increase for developed and global equity ETFs as well as for emerging market debt ETFs. The other maximum TERs for ETFs remain unchanged. There continues to be no distinction between actively managed ETFs and passively managed ETFs.

The maximum TER of private equity (PE) funds is raised from 2.25% to 2.35%, but the maximum TER of private debt (CP) funds is slightly reduced and brought into line with that of PE funds. The explanation for the latter is that there was a comparatively low amount of data for PC funds in the Preqin database used by regulators to set the new maximum TERs. Similarly, the maximum TERs for funds of funds were reduced to 3.75%.

On a related note, fee reporting requirements for Chilean feeder funds will now be subject to the same reporting standard to which sponsors receiving direct investments are subject to. (i.e. the ILPA-style format).

In other respects, there were no changes, meaning that the same updated databases (Morningstar for registered funds and Preqin for private equity and private debt) were used to calculate maximum TERs, and the same percentiles were used for the statistical methodology to determine which funds to consider within the relevant databases.

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