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At a glance: Investor: Bice Vida Structurer: Deutsche Bank Deal type: Synthetic leveraged inflation assets Date: June 30, 2005 |
It’s difficult enough for pension funds and insurance companies in the UK or US to find actuarially acceptable yield, but for their counterparts in more closed economies such as Chile it’s much harder.
Chilean insurance company Bice Vida found itself in such a predicament in 2005. Its liabilities are denominated in UF (unidad de fomento), inflation-indexed Chilean pesos. But demand for long-dated, high-yielding, UF-denominated fixed-income investments is enormous – Chilean insurance companies control some $16 billion – and vastly exceeds supply.
Institutional investors such as Bice Vida are allowed to buy the debt of foreign companies such as Mexico’s wireless telecommunications company Telmex.
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