CHILE Trends and Developments Contributed by: Felipe Díaz Toro, Victor Riadi and Ignacio Ruiz Rodríguez, EDN Abogados
Environmental, social and governance (ESG) funds The importance of ESG considerations has grown significantly. According to the Financial Market Commission (CMF) in Chile, 40 mutu - al and investment funds have adopted ESG- related terms in their names, with the majority being investment funds emphasising environ - mental aspects. The CMF notes that the rise of ESG funds reflects increasing awareness and demand for sustainable and socially responsi - ble investments. Self-reported assets under management (AuM) in ESG funds range from USD900 million to USD29 billion, depending on whether the query uses a “strict” definition or an “ESG factor integration” approach. The most common investment strate - gies employed by these funds include “ESG fac - tor integration”, “screening”, and “engagement.” However, most asset management firms (AGFs) lack a formal methodology to assess whether an investment qualifies as ESG. The primary sources of information are typically provided by issuers themselves or specialised ESG rating providers. Regulatory and self-regulatory changes Pension System Reform On a broader level, an important development affecting the fund industry will be the reform to the Pension Fund System approved by Chile’s congress in late January 2025. This is expected to introduce significant changes to the regula- tory framework governing pension fund invest- ments, including an important increase to the system’s assets under management, fewer reg- ulatory and capital restraints for pension fund managers and a reward and punishment sys- tem for performance against a benchmark, both which should open the market for new players, governmental entities in supporting roles to pri-
vate fund managers, among others. Additionally, the reform includes stricter governance require- ments and enhanced transparency measures to ensure the prudent management of pension fund resources. Taxation and fund mergers New regulations regarding the tax treatment of mutual fund shares, fund mergers and tax exemp - tions have been introduced. These changes aim to preserve the tax status of investments during mergers, and to reduce or eliminate certain tax exemptions. By maintaining tax neutrality in fund mergers, the new rules promote the consolida - tion and efficiency of the Chilean investment fund industry, while the reduction of certain tax exemptions seeks to create a fairer tax environ - ment across different investment types. Investment advisory services Proposed regulations aim to standardise invest - ment advisory services, ensuring consistency across the industry. The MMFF 2024 Report details these proposals as efforts to enhance the quality and transparency of investment advice. By standardising advisory services, the regulations seek to protect investors and ensure the provision of accurate, unbiased and com - prehensive advice. This alignment is intended to foster trust in the financial advisory industry and promote a more professional and reliable investment environment, in the context of the continued growth in popularity of investment funds. New regulations On 23 December 2024, the Financial Market Commission (CMF) published General Rule No 526 (NCG 526), replacing NCG No 157 of 2003. This new regulation establishes updated minimum equity and guarantee requirements for general fund and portfolio managers. It introduc -
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