Abstract

SANDOVAL-ALAMOS, Eduardo  and  ORTEGA-PACHECO, Triny. EXCHANGE RISK: TO COVER OR NOT TO COVER? THE CASE OF PENSIONS MULTI-FUNDS IN CHILE. Innovar [online]. 2019, vol.29, n.73, pp.55-67. ISSN 0121-5051.  https://doi.org/10.15446/innovar.v29n73.78011.

This article evaluates the performance of multi-funds managed by the Pensión Funds Managers (PFM) in Chile by comparing covered and uncovered exchange risk strategies. We analyzed two periods: 1) From September 2010 to November 2012, and 2) from December 2012 to March 2014, to evaluate the effect that redefining the exchange coverage, ordered in 2012 by the regulator, had on the results. As a performance measure we used a monthly performance index, adjusted for the variability índex considering mobile four-month windows. The results show that, during the first periods, multi-funds A, B and C had a better performance, while multi-funds D and E showed no statistically significant differences. During the second period there was no evidence of a higher performance in any multi-fund. We conclude that the exchange coverage benefits do not only depend on the capabilities to foresee the spot exchange rates in the future, nor on their capability to negotiate the exchange rates on the term agreements, but also on how close the exchange coverage is in relation to the limits set by the regulator.

Keywords : PFM; exchange coverage; multifunds; exchange risk.

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