November 18, 2020

Morningstar Updates Analyst Ratings on 10 Mexican Pension Funds, Finds Progress as Fees Decline and the System Transitions to Target-Date Funds

MEXICO CITY, Nov. 18, 2020 — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published updated Morningstar Analyst Ratings™ and comprehensive research reports on 10 target-date series offered by Mexico’s pension fund managers, or “Administradoras de Fondos para el Retiro” (Afores), which together include 100 unique investment portfolios, or “Sociedad de Inversión Especializada en Fondos para el Retiro” (Siefores). The Analyst Rating for funds represents Morningstar’s conviction in the fund’s ability to outperform on a risk-adjusted basis over the long term. The five-tiered, qualitative Morningstar Analyst Rating scale has three positive ratings—Gold, Silver, and Bronze—in addition to Neutral and Negative ratings. This year, Morningstar manager research analysts awarded two Silver ratings, one Bronze rating, three Neutral ratings, and four Negative ratings to the 10 target-date series available in the Mexican pension system.

In December 2019, the Mexican pension system transitioned from five static, asset allocation funds to target-date funds. Mexican workers now have access to portfolios that are more closely tailored to their age and gradually reduce risk as investors near their expected retirement date. Each of the 10 Afores manages a target-date series that includes 10 unique portfolios offered in five-year increments to investors from an age of less than 25 years to 65 years. As of November 2020, the pension system’s MXN 4.5 trillion of assets under management represent approximately 19% of the country’s gross domestic product.

“The transition to target-date funds is a major improvement over the previous structure of five static asset allocation funds. Target-date funds provide investors a customized risk profile, gradually reducing risk as workers approach retirement,” said Thomas Lancereau, Morningstar’s director of manager research for North America. “We’re also pleased to see Mexican workers benefitting from continued fee reductions. During the last year, the system’s average fee fell by six basis points to 0.92%. Furthermore, in August 2019, the regulating body, CONSAR, and the 10 Afores agreed to continue lowering expenses, with the goal of having an average fee of 0.70% by 2024.”

“This year’s review of pension fund managers resulted in an upgrade of Profuturo’s Siefores Basicas to Silver from Bronze, acknowledging the investment team’s sensible and well-defined investment process and substantial glide-path research as the industry transitioned to a target-date structure, which we think will lead to strong results for investors going forward,” said Lancereau. “We downgraded the rating for Citibanamex’s Siefores Basicas to Neutral from Silver due to notable turnover on the team with the departure of the fund’s CIO, CEO, head of bonds, and head of equities, all between September 2019 and March 2020. All other Afores’ Siefores Basicas have retained their previous overall ratings.”

Morningstar analysts rated 100 mandatory Siefores Basicas offered by Mexico’s 10 Afores: Siefores Básicas Inicial, 90-94, 85-89, 80-84, 75-79, 70-74, 65-69, 60-64, 55-59 y de Pensiones. The 10 investment strategies offered by each Afore received the same pillar and overall Analyst Rating. The Morningstar pillar ratings—People, Process, Parent, Performance, and Price—and the overall Analyst Rating are shown below:

Siefores

People

Process

Parent

Performance

Price

Overall Rating

Azteca

Neutral

Negative

Neutral

Neutral

Negative

Neutral

Citibanamex

Neutral

Neutral

Neutral

Neutral

Neutral

Neutral

Coppel

Negative

Negative

Neutral

Neutral

Negative

Negative

Inbursa

Negative

Negative

Neutral

Negative

Neutral

Negative

Invercap

Neutral

Negative

Neutral

Negative

Negative

Negative

PENSIONISSSTE

Negative

Negative

Negative

Neutral

Positive

Negative

Principal

Positive

Neutral

Neutral

Negative

Negative

Neutral

Profuturo

Positive

Positive

Positive

Positive

Neutral

Silver

SURA

Positive

Positive

Positive

Positive

Neutral

Silver

XXI Banorte

Neutral

Positive

Neutral

Neutral

Neutral

Bronze

An article highlighting the notable changes on Morningstar.mx is available here. The ratings and reports are available to the investing public here. An introduction to the Siefores evaluation methodology along with three short, explanatory videos is available here.

The research and ratings will also be available in Morningstar DirectSM, the company’s core investment research and analysis platform. Learn more here.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $215 billion in assets under advisement and management as of Sept. 30, 2020. The Company has operations in 29 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.

Morningstar's Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Morningstar Analyst Ratings are based on Morningstar's Manager Research Group's current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Morningstar Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Morningstar Analyst Ratings and are not guarantees nor should they be viewed as an assessment of a fund's or a fund's or separately managed account's underlying securities' creditworthiness. This press release is for informational purposes only; references to securities or a separately managed account investment strategy in this press release should not be considered an offer or solicitation to buy or sell the securities or to invest in accordance with that strategy.

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