Central Bank of Chile sets 80% limits on pension funds’ foreign and sovereign investments and applies the same cap to FAPP

The Central Bank of Chile has set maximum investment limits for pension funds at 80% of fund value for both overseas investments and sovereign instruments, using powers granted under Chile’s pension reform. The same 80% caps will apply to the Autonomous Fund for Pension Protection (FAPP), and the limits will take effect once the new Generational Funds (FFGG) are implemented. The decision maintains the current Multifund policy of setting structural limits at the maximum allowed by law, with the foreign-investment cap set at 80% of the FFGG managed by the same entity and the global cap on sovereign securities also set at 80%. The central bank noted the role of these limits in supporting financial stability by reducing the risk that abrupt pension portfolio shifts disrupt markets, particularly the exchange rate and domestic interest rates. The reform requires the central bank to set the limits before 1 March 2026, ahead of the Superintendence of Pensions issuing the FFGG investment regime by September 2026, and the reform’s FFGG framework is due to replace the Multifund scheme from 1 April 2027. The limits will be reviewed once the FFGG investment regime and the pace of implementation are known. The central bank will monitor the transition and consider adjustments if implementation signals material impacts or risks to financial stability.