Resolution SBS No. 1560-2022: Amending Title VI to Update the Methodology for Calculating SPP Profitability

Los Laureles Nº 214 - Lima 27 - Peru Tel. : (511)6309000 Lima, May 11, 2022 S.B.S. Resolution No. 1560-2022 The Superintendent of Banking, Insurance and Private Pension Fund Administrators CONSIDERING: That, subsection f) of Article 57 of the Law of the Private System of Pension Fund Administration, whose Consolidated Text was approved by Supreme Decree No. 054-97-EF, hereinafter the SPP Law, establishes that it is an attribute of the Superintendence to issue provisions that allow uniforming the information that AFPs provide to their affiliates and the general public, in order to avoid errors or confusion regarding their financial reality and their services, as well as the purposes and functioning of the system; That, the Sole Complementary Derogatory Provision of Supreme Decree N° 196-2021-EF, repeals Article 74 of the Regulations of the SPP Law, from the entry into force of the resolutions issued by the Superintendence on the matter regulated by the aforementioned article; That, through Resolution No. 052-98-EF/SAFP, Title VI of the Compendium of Regulatory Supervisory Standards of the Private System of Pension Fund Administration (SPP), referred to Investments, was approved; That the current methodology for calculating the profitability of the SPP uses the average of the daily quota values of the calculation month and the initial month, and was defined with the objective of mitigating the risk that any of the AFPs could make movements in local investments that increase the quota value of a specific date, because at that time the investment portfolio was predominantly local; however, the current context of a larger size of the investment portfolios of the pension funds and the expansion of the possibilities to invest these funds abroad, reduces the aforementioned risk and evidences that the current methodology is not adequate for measuring the performance of pension funds; That, taking into account what is described in the previous consideration, it is necessary to modify the current methodology for calculating the profitability of pension funds and quota values, taking into account some of the GIPS (Global Investment Performance Standards) standards, in order to ensure that profitability indicators are easy to understand for affiliates, and easy to compare with other investment alternatives managed by local and international managers other than AFPs, for the purposes of their adequate disclosure to the market; That, in that framework it is also necessary to modify Article 72°-A of the aforementioned Title VI of the Compendium of Regulatory Supervisory Standards of the Private System of Pension Fund Administration, in order to eliminate the impact that investment excesses currently have on the methodology for calculating profitability indicators, more so when said excesses are subject to administrative measures by the Superintendence; That, in order to collect the opinions of the general public regarding the proposals for modification to the SPP regulations, the pre-publication of the draft resolution on the matter was ordered on the electronic portal of the Superintendence, under the provisions of Supreme Decree N° 001-2009-JUS; Taking into consideration the opinions expressed by the Adjunct Superintendences of Private Pension Fund Administrators, of Risks, of Legal Advice and of Economic Studies; and, In exercise of the powers conferred by items 7 and 9 of Article 349 of the General Law of the Financial System and of Insurance and the Organic Law of the Superintendence of Banking and Insurance, Law No. 26702 and its amendments, in Articles 25 and 57 of the SPP Law, and in the Third Final and Transitory Provision of the Regulations of the SPP Law; RESOLVES: Article First.- Modify Subchapter II of Chapter V of Title VI of the Compendium of Regulatory Supervisory Standards of the Private System of Pension Fund Administration, approved by Resolution No. 052-98-EF/SAFP, according to the following text:

“SUBCHAPTER II CALCULATION OF PROFITABILITY Article 70°.- Annualized nominal profitability. In accordance with what is established by Article 85° of the regulations, the annualized nominal profitability of a type of fund for a certain calculation period, is the return expressed in annual terms, and is calculated based on the quota values of the last business day of the corresponding months of said calculation period, applying the following formula:

Where: = Annualized nominal profitability of a type of pension fund in the calculation period. = Last business day of the calculation period. = Last business day of the month prior to the calculation period. = Quota value on day . = Quota value on day . = Number of months in the calculation period.

Article 71°.- Annualized real profitability. The annualized real profitability is obtained by discounting the variation of the Consumer Price Index for Metropolitan Lima published by the National Institute of Statistics and Informatics (INEI), or the indicator that replaces it, from the annualized nominal profitability, whether for a type of fund or for the average of any of the types of fund, applying the following formula:

Where: = Annualized real profitability of a type of fund in the calculation period. = Annualized nominal profitability of a type of fund in the calculation period. = Last business day of the calculation period. = Last business day of the month prior to the calculation period. = CPI of Metropolitan Lima of the month to which day belongs. = CPI of Metropolitan Lima of the month to which day belongs. = Number of months in the calculation period.

Article 72°.- Average annualized nominal profitability of a type of Fund. The average annualized nominal profitability of a type of fund for a certain calculation period, is equal to the geometric composition of the average profitability of said type of fund, obtained on each day of the calculation period, expressed in annual terms. In terms of formula, the daily profitability for a type of fund, is expressed as follows:

Where: = Daily nominal profitability of the type of fund calculated on day . = Business day on which profitability is to be calculated. = Business day prior to the day on which profitability is to be calculated. = Quota value on day . = Quota value on day .

The average daily profitability for day t for a type of pension fund corresponds to the average of the daily nominal profitabilities of that type of fund, weighted by the proportion that each type of fund administered by AFPs represents, with respect to the total corresponding by type of fund in the SPP, on the previous day. In terms of formula, it is expressed as follows:

Where: = Average daily nominal profitability of a type of fund on day . = Business day on which profitability is to be calculated. = Business day prior to the day on which profitability is to be calculated. = Pension fund of the evaluated type administered by the AFP = Number of pension funds of the same type existed in the SPP on day . = Value of the portfolio administered by the AFP of the type of fund evaluated on day . = Daily nominal profitability generated on day , of the type of fund evaluated, administered by the AFP . In this way, the average annualized nominal profitability of a type of pension fund, is determined by the following formula:

Where: = Annualized nominal profitability of the type of fund (0, 1, 2 or 3) in the calculation period. = Business day on which the daily profitability is calculated. = Number of business days in the calculation period. = Number of years in the calculation period. = Average daily nominal profitability of the respective type of fund on day .

The average annualized nominal profitability of the SPP is determined in a similar manner to the aforementioned, but using all pension funds existing in the SPP.

Article 72°A.- Risk-adjusted profitability. The risk-adjusted profitability of a type of fund obtained in the last twelve (12) months, is obtained by dividing the nominal profitability of the last twelve (12) months by the standard deviation of the daily profitabilities of the last twelve (12) months, expressed in annual terms. In terms of formula it is expressed:

Where: = Risk-adjusted profitability of the last 12 months calculated at month . = Month in which the risk-adjusted profitability is calculated. = Nominal profitability of the type of pension fund of the last twelve (12) months calculated at month . = Standard deviation of the daily nominal profitabilities of the last 12 months, calculated at month . = Number of business days of the last twelve (12) months.

Article 73°.- Quota value. Business days. For the calculation of the quota value referred to in Articles 70°, 71°, 72° and 72°-A, only the quota values of business days are considered, which correspond to the days on which the AFP received the receipt confirmation of the respective Daily Investment Reports from the Superintendence.”

Article Second.- This resolution enters into force on January 1, 2023. Register, communicate and publish MARIA DEL SOCORRO HEYSEN ZEGARRA Superintendent of Banking, Insurance and AFP