The pension reform in the market

Many years and several governments had to pass to finally have a pension reform in Chile. The higher contribution to individual accounts will bring significant flows to the local capital market (pension funds invest approximately 7% in Chilean stocks) and investors seem to take this news very positively.

The IPSA and world stock markets have a structural relationship quite close to 1, measured in dollars. That is, when global markets rise, for example, 10%, the local market is expected to have an equivalent rise. 2025's performance is completely out of the ordinary; the world's stock indices have had a volatile start to the year and reach a return of 2.8%. Meanwhile, the IPSA climbs to around 14% return in dollars.

Certainly—as with everything in financial markets—we can't say the pension reform is the only variable at play. Macroeconomic conditions, at the margin, have surprised to the upside recently. In addition, the price of copper has proven very resilient in a challenging global environment for commodities, which is obviously positive for our country.

All in all, this is very good news for Chilean investors and for an asset class that had lost its appeal in recent years but that, from a portfolio-construction standpoint, can still play an important role in diversification when investing.

Original publication in La Segunda March 4, 2025.