UPDATE 1-Colombia to delay signing pension fund decree: sources

Tue Jul 9, 2013 3:47pm EDT

By Nelson Bocanegra and Carlos Vargas

BOGOTA, July 9 (Reuters) - Colombia will delay the signing and enactment of a decree that would encourage pension funds to diversify their portfolios and invest more overseas, high-level government and industry sources told Reuters on Tuesday.

The measure, first unveiled in April, had been aimed at boosting dollar-denominated investments in pension funds' portfolios and diversifying their risk. Finance Minister Mauricio Cardenas may announce a delay in signing the decree this week, the sources said.

The decree was also designed to weaken Colombia's currency. The government hoped pension funds buying dollars to invest more overseas would ease pressure on the peso, which last year gained 9 percent and made it one of the world's strongest currencies.

But the steady flow of dollars into Colombia has since slowed, lessening the need for the decree.

Comments last month from Federal Reserve Chairman Ben Bernanke that the Fed would likely slow the pace of its stimulative bond purchases drew investors away from emerging markets like Colombia, bringing declines in the peso to about 9 percent this year and reducing the need for the measure.

Bernanke's comments also led investors away from the local Treasury bond market, pushing the yield on the benchmark TES bond that matures in 2024 up 188 basis points since the beginning of May on expectations the Fed would pull its economic stimulus.

Holding back on the pension fund decree may encourage portfolio managers to bolster purchases of peso-denominated TES bonds, which historically make up the bulk of their assets.

In April, Deputy Finance Minister Andres Restrepo told Reuters the decree would be ready in June.