AFP Aware of Risks Since 2024: Superintendent Reveals Prior Warnings Ahead of Fondo E Crisis

Original article: Las AFP sabían de los riesgos desde 2024: Superintendencia expone advertencias previas a crisis del Fondo E

Amid the crisis triggered by the collapse of Fondo E, it has come to light that since 2024, Pension Fund Administrators (AFP) were aware of the risks associated with the increasing use of derivative instruments, based on warnings from the Superintendency of Pensions.

It is important to remember that the controversy erupted over the substantial losses from the pension funds amounting to US$7.7 billion due to bets on U.S. interest rates, with an estimated impact exceeding US$11 billion on pension savings.

The most significant case was that of Fondo E, considered the most conservative fund in the system, which encompasses nearly 770,000 affiliates and experienced a real decline of 10.4% from January to September 2026, marking the second worst performance on record.

Before the Labor Commission of the Chamber of Deputies, the superintendent of Pensions, Joaquín Cortez, stated that warnings began in October and November 2024, when the agency met with general managers and investment heads of the AFPs to discuss their increasing positions in derivatives.

By the end of that year, the Superintendency alerted the boards about the risks of market, liquidity, and counterparty associated with these types of operations.

«I was tasked with signing this new investment regime’s issuance, but as it seems, this is work that the superintendency has been doing beforehand. Coming from investments, I understood quickly that we needed to expedite the process, but there was prior work being done by the superintendency,» highlighted Cortez, who previously served as the investment manager, president of AFP Provida, and led the Commission for the Financial Market (CMF).

He recounted that the warnings continued on January 15, 2025, through an official letter that mandated strengthening the risk management policies. On that occasion, the regulatory body required the establishment of explicit acceptable exposure levels, the integration of control mechanisms, and ensured that the boards exercised oversight over operations.

According to the superintendent, «the concern must be for absolute risk, and it must also be the responsibility of the board.»

Significant Losses of Fondo E

In his presentation before parliamentarians, he indicated that the operations of interest rate swaps began to grow by 2023 and that these instruments enabled to extend the duration of the investment portfolios, also increasing their sensitivity to fluctuations in international rates, as reported by El Mostrador.

According to Cortez, by December 2023, the derivatives accounted for more than one additional year of duration for the portfolios. Later, this contribution exceeded nine years before it began to decline in July 2026.

The impact of the drop was evident in September when the Fondo E, deemed the most conservative, lost 4.92% and showed a real decline of 10.4% in the first nine months of the year.

Additionally, he stated that the valuation losses from interest rate derivatives exceeded US$10 billion by the end of September, accounting for all five multifonds and operations with national and international banks.

Of that total, US$1 billion was attributed to losses from Fondo E and US$1.724 billion from Fondo D.

In light of the controversy and the crisis triggered, the superintendent confirmed that the supervisory body is conducting an investigation and reaffirmed his commitment to «do everything possible to refrain from making judgments, as I do not want to disqualify myself.»