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Colombia rethinks sovereign portfolio makeup due to low returns
December 5, 2012 / 6:35 PM / 5 years ago

Colombia rethinks sovereign portfolio makeup due to low returns

* Colombia may look at corporate-debt, equity investments

* Wants to put $1 bln a year of oil, mine royalties in fund

By Jack Kimball

BOGOTA, Dec 5 (Reuters) - Colombia will seek to diversify about $1 billion of annual overseas investments as near-zero yields for government paper in developed markets have cut returns on its sovereign fund, Finance Minister Mauricio Cardenas said on Wednesday.

Global economic troubles have forced central banks in Europe, the United States and other regions to keep interest rates at historical lows to try to boost sluggish growth, meaning that developed countries may have zero or negative-yielding bonds.

Cardenas said the Andean nation would meet next year with managers of other sovereign funds to figure out how to increase returns. Colombia traditionally invests in fixed income markets in Europe, the United States and Japan.

“They will teach us what kind of portfolio you can have for a sovereign fund, including, for example, corporate debt and stocks. We don’t rule out these options, everything must be under the criteria of the highest safety standards,” he said.

Latin America’s fourth-largest crude producer has seen billions of dollars in foreign direct investment pour in over the past decade as companies have taken advantage of improved conditions resulting from a U.S.-backed security crackdown.

Cardenas said the government hoped to put about $1 billion annually from mining and oil royalties into the sovereign fund to invest abroad.

“We want to have a portfolio that is a little bit more diversified than we have now,” Cardenas told journalists, adding that current sovereign investments abroad totaled about $900 million.

Emerging market economies such as Colombia’s are expected to grow 5.3 percent this year, four times higher than the 1.3 percent expected for advanced economies, the International Monetary Fund has said.

Latin America and the Caribbean is seen expanding 3.2 percent in 2012, according to the IMF.

Colombia’s ability to weather outside financial shocks was cited by three major Wall Street ratings agencies last year in raising the country to investment-grade credit status.

The government expects economic growth of 4.8 percent this year and next, versus 5.9 percent last year.

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