Pension Funds in Emerging Markets: A Projection of Mexican Pension Assets

The defined contribution pension scheme promoted by the World Bank in the mid-1990s brought an increase in the number of institutional investors within the financial markets of countries that implemented this new system. The World Bank considered that pension funds in developing countries would positively impact them. This is how it becomes increasingly important for pension funds to have more tools and models that allow them to optimize their portfolios according to their needs. Following the introduction of machine learning models, long-term portfolio management has changed, as these large institutional investors have now found a way of managing their portfolios that seems to be more tailored to their needs, compared to the models that were used, emerged from financial theories. In Mexico, the demographic and financial projection allows us to see that if this growth trend in the SAR continues, and the investment regime remains unchanged, by 2050 the resources could require around 7.4 trillion Mexican pesos of government securities outstanding (1.11 times the current total value) and 4.9 trillion of equity securities outstanding (about 60% of the current total value).