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Do Investment Regulations Compromise Pension Fund Performance? Evidence from Latin America: A Comment

Most of the policy assertions in the paper by Srinivas and Yermo (1999), published in Revista de Análisis Económico, are not backed by the empirical evidence. Their conclusions that ‘pension funds (in Chile) did not choose an efficient asset allocation or risk return combination’, and mhat ‘current regulations are severely jeopardizing performance’, are not backed by the evidence for Argentina, Chile and Peru. However, these assertions may be valid for the Mexican AFORE, who are banned from investing in equities and foreign securities. We dispute on theoretical grounds their proposal that ‘investment regulations should not be continued in the long run’, by providing benevolent rationales to keep the main investment limits on a permanent basis.