UPDATE 1-Mexico pensions bet $460 mln on property, debt

* Mexican pensions set to double private equity exposure

* Real estate, infrastructure bets favored

* Managers say current deal structure could improve

(Recasts, adds background, analyst comment, details)

By Patrick Rucker

MEXICO CITY, Aug 12 (Reuters) - Mexican private pension funds are on track to more than double their investment in private equity this year after placing roughly $460 million with real estate and debt funds this month.

The 14 pension funds, known as Afores, may allocate 8 percent of their roughly $100 billion in assets to "capital development certificates," or CKDs, which regulators conceived last year as a way for the Afores to make private equity bets.

The Afores purchased about $1 billion worth of the new certificates through a handful of deals in 2009, but dozens of private equity projects are being considered as the pension funds seek to boost returns.

In August alone, Mexican airport magnate Fernando Chico Pardo raised $200 million to finance his private equity fund, Promecap, while AMB Property Corp AMB.N launched a real estate fund with $260 million of pension cash.

Promecap will use the bulk of its money to soak up risky corporate debt and other distressed financial assets, while AMB is expected to bankroll warehouses, distribution hubs, and other industrial real estate.

Mexican President Felipe Calderon wants the Afores to give a capital injection to roads, ports and other infrastructure projects while meeting the growing needs of an aging population.

About 65 percent of Afore holdings are in ultra-safe government debt that cannot deliver the long-term returns that officials hope to see.

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Investment chiefs have welcomed the CKDs as a way to test their money managing prowess and differentiate their funds from competitors. Afore managers say they are sure retirement money is safe in the new securities because they are run by asset managers with proven track records.

"These projects will have trans-national tenants delivering quick revenue and with very little variability," Enrique Solorzano, director of investments for ING bank's Afore, said of the real estate funds in the pipeline.

"There is a certain level of risk -- of course, these are private equity deals -- but they are relatively low levels of risk," Solorzano said.

Prudential Financial Inc (PRU.N) is being cleared to seek between $200 and $240 million of Afore cash for its own real estate fund, market sources said.

GE Capital (GE.N), one of the top commercial lenders in Mexico, is crafting a real estate investment fund, while several home-grown real estate investors, like Institutional Infrastructure, are also making a play for Afore backing. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Factbox on Mexico's pending Afore investments [ID:nN12138352] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

While Afore managers welcome the new asset class, investment chiefs complain that the CKD securities are needlessly bureaucratic with multiple layers of oversight.

The CKD structure also cuts into near-term returns, investors said.

While conventional private equity funds call for capital from investors when they are ready to make a deal, the Afores must put their entire investment into the CKD fund at its inception.

Typically, the CKD manager parks the Afore money in government debt until it is ready to invest.

"You are getting 4.5 percent on your money in (Mexican government bonds), less the commission. You have a negative carry there," said Leonardo Pin, general director of the MetLife Afore.

Investment chiefs imagine that the CKD security could be dropped in time for a conventional private equity structure.

"They will get rid of this shell eventually," Pin said. "We would love to see that tomorrow, but it will take at least a couple years.

(Reporting by Patrick Rucker; Editing by Paul Simao)