The decision was made by the Comisión Clasificadora de Riesgo (CCR) which is responsible for establishing approval procedures for, and approving shares of, investment funds for Chilean pension funds.
It said that Irish funds have been “disapproved” for failing to comply with provisions which dictate that the rating of the country in which the fund or holding company is regulated is rated at least category A (S&P rating –A, Fitch – A (+,-); and Moody’s A (1, 2, 3)) and holds a satisfactory rating from at least two of the three rating agencies.
In mid 2010, Ireland underwent a series of credit rating downgrades due to sovereign debt issues which triggered concerns about breaching this regulation. According to international law firm Dechert, the CCR were dissuaded from immediately “disapproving” the funds by the Irish Funds Industry Association and instead put them on a “watch list”.
Despite Ireland managing to maintain a BBB+ rating from S&P and Fitch, a downgrade by Moody’s to junk status in July appears to have been the tipping point for the CCR.
However, according to Dechert, the CCR said this decision, rather than constituting a complete prohibition on investment, will result in Irish funds being qualified as restricted investments rather than general investments.
Chilean pension funds are able to invest in restricted investments, but are subject to stricter investment limits.
