The world's richest man is proving better at generating wealth for himself than the 1.1 million Mexican pensioners investing with him.
While Carlos Slim's personal wealth climbed 22 per cent in 2012 to US$75.2 billion, the funds controlled by his bank, Grupo Financiero Inbursa SAB, generated the worst returns for all of the four age groupings in Mexico's pension system in the 12 months up to the end of November.
Inbursa's funds posted average returns of 6.2 per cent from the four categories, less than half the 13 per cent industry average, as they kept as much as 64 per cent of their money in government bills maturing in one year or less. Yields on one-year bills averaged 4.56 per cent in 2012.
The strategy threatens to make Slim's pension funds the worst in Mexico for the third time in four years. Regulators stripped the Inbursa funds of 10.7 billion pesos (HK$6.4 billion) in February as part of a newly implemented review aimed at taking away money from the worst of the country's 13 pension fund managers, known as Afores. Regulators are scheduled to redistribute some of the industry's accounts again next year.
"They're at the bottom of the pyramid," says Gabriel Casillas, the chief economist and head of research at Grupo Financiero Banorte SAB. "They should rethink their strategy and do a better job if they're going to continue in this business."
Inbursa says it's sticking with its plan and expects to be vindicated when borrowing costs rise.
Luis de la Cerda, the chief investment officer of Afore Sura, which had the best average return for the four age groups in the 12 months to the end of November, says bonds known as Mbonos were a focus of the funds. Sura's funds averaged a 15.2 per cent return in the past year. "The bonds were a great investment," says de la Cerda. He says that Sura has about 21 per cent of its 252 billion pesos in assets under management in Mbonos.
The average across Mexican Afores was 19.6 per cent at the end of November, according to Consar data. Inbursa had about 97 billion pesos in assets under management at the end of November.
While Inbursa was "wrong" to focus on shorter-maturity investments, the strategy could prove to be more profitable this year as President Enrique Pena Nieto seeks reforms to boost growth, according to Araceli Espinosa, a fixed-income strategist at the Mexican unit of Bank of Nova Scotia.
Investor optimism has been growing that Nieto will make good on pledges to push through legislation to end state-owned Petroleos Mexicanos' monopoly and lift tax revenue.
Mexico will grow 3.5 per cent next year and 3.85 per cent in 2014, according to the median forecast in Bloomberg surveys. Inbursa says the nation's growth prospects make long-dated bonds an unattractive investment.