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Amendments to Mexico’s Pension Fund Law

4 March 2019

In early 2019, the federal executive branch of the Mexican Government introduced a proposal to amend provisions of the Pension Funds Systems Law.

LAVCA spoke with Nader, Hayaux & Goebel about the amendments and the effect they are expected to have on operating models, investment opportunities, and performance fees.

By Hans Goebel, Gunter Schwandt, and Diego Sánchez of Nader, Hayaux & Goebel

On January 16, 2019, the federal executive branch of the Mexican Government introduced a legislative proposal (the “Proposal”) to the House of Representatives (Cámara de Diputados) of the Mexican Congress to amend various provisions of the Pension Funds Systems Law (Ley de los Sistemas de Ahorro para el Retiro) (the “SAR Law”).

The main amendments introduced by the Proposal included:

A New Operating Model for Afores

The Retirement Fund Administrators (Adminstradoras de Fondos para el Retiro) (“Afores”) will operate through Specialized Investment Funds of Retirement Funds (the “Fiefores”) which will replace the Specialized Retirement Fund Investment Companies (“Siefores”) Under this Proposal, an exception to the corporate governance regime established in the General Law of Commercial Companies is proposed, since the Fiefores will not have a shareholders’ meeting or board of directors. Furthermore, the Proposal contemplates that the Pension Funds System Commission (Comisión Nacional del Sistema de Ahoro para el Retiro) (“Consar”), with the prior opinion of the Ministry of Finance (Secretaría de Hacienda y Crédito Público) (“SHCP”) and the Mexican Central Bank (Banco de México) (“Banxico”), shall determine the investment regime, the levels of liquidity and market risk for the Fiefores (currently such determination also requires the opinion of the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores)).

Siefores will have a 12 month period from the date the Proposal becomes effective to request approval from Consar to convert the Siefores into Fiefores, including the amendment to their bylaws to comply with the corporate governance provisions applicable to Fiefores pursuant to the SAR Law. If the application is not timely submitted or the authorization of Consar is not obtained within the 12 month period, the respective Siefore will enter into a state of dissolution and liquidation.

New Investment Opportunities

Fiefores will have access to greater investment opportunities than Siefores had, including the possibility of investing directly in securities that are subject to private offerings, in accordance with the general provisions to be issued by Consar.

Fiefores will be able to (1) receive money deposits used as collateral in repo transactions, secured lending and derivative financial instruments, (2) carry out securities lending transactions and repurchase agreements, including over securities issued by companies, as well as credits or loans only in their capacity as creditors, (3) receive cash deposits as long as they are used as collateral in repurchase transactions, securities lending and derivative financial instruments, (4) acquire international securities authorized by Consar, (5) carry out loan, credit and repurchase transactions to satisfy the liquidity levels established by Consar, and (6) carry out short transactions with securities used as collateral under pledge agreements.

It is not yet possible to define the scope in the changes to the investment regime or if it will represent a more flexible investment regime. This scope will be defined in the secondary regulation issued by Consar.

Performance Fees

Fees charged by Afores will have an additional component that will be calculated on the basis of the investment returns received by pension holders through their investments in the Fiefores. Consar will publish a specific calculation methodology for such new component. Such performance component may serve to align the interests of investment managers, pension holders and Afores.

Withdrawal of Voluntary Deposits

Pension holders will be allowed to withdraw their voluntary deposits from their retirement funds at any time.

What’s Next?

The Proposal was published in the Parliamentary Gazette of the House of Representatives on January 23, 2019, and is subject to approvals through the legislative process. If approved, Consar, SHCP, and Banxico must issue secondary regulation in this regard. 


Hans GoebelHans Goebel, Partner, Nader, Hayaux & Goebel: Hans Goebel is an internationally recognized leading attorney and founding partner at Nader, Hayaux & Goebel. His main areas of practice are private equity, mergers and acquisitions, capital markets, banking & finance, real estate, foreign investment, and general corporate and commercial law. Hans has a strong background in banking law and regulations, and handles a variety of financial, capital markets and corporate governance matters. He is an expert in complex structured finance deals and security issuances, as well as local and cross-border mergers & acquisitions and private equity transactions. He advises clients on financial and corporate restructurings and frequently acts as trusted advisor to boards and board committees, controlling shareholders and individual directors on critical corporate governance issues and shareholder disputes.


Gunter SchwandtGunter Schwandt, Partner, Nader, Hayaux & Goebel: Gunter Schwandt specializes in capital markets, mergers & acquisitions, structured finance, secured transactions, cross-border lending and real estate finance. Gunter is an expert in highly complex public issuances and securitizations and has developed in-depth expertise in CKDs (development capital certificates) and FIBRAs (the Mexican equivalent of a U.S. Reit) advising sponsors and underwriters alike. To date he has advised the sponsor in the structuring and launch of a total of seven CKD funds placed in the Mexican Stock Market, focused on the real estate industry and the energy and infrastructure sectors as well as on four FIBRA transactions, focused on the retail and hotel industries.


Diego SánchezDiego Sanchez, Partner, Nader, Hayaux & Goebel: Diego Sánchez specializes in mergers and acquisitions, capital markets, banking and finance and private equity practice areas. Diego has worked in multiple capital markets transactions and has been involved in several mergers and acquisitions. He has strong international experience and is regularly involved in cross-border transactions, particularly on the side of Financial Institutions, LPs and GPs.