Uruguayan pension fund goes supranational for second time

Uruguayan pension fund, Republica Afap, has invested in a EUR/USD-linked participation note with the intent to hedge its portfolio against the depreciation of the euro against the dollar. The structured product, issued in October 2008, is the second such trade invested in international debt by a Uruguayan pension fund after four funds, including Republica, bought an equity-linked note in May 2008 (See Structured Products June 2008).

The product is issued by the International Bank for Reconstruction and Development (IBRD), a triple A-rated issuer and one of five divisions of the World Bank, while Société Générale acted as dealer on the transaction.

The Uruguayan government passed a law in 2007 allowing local pension funds, for the first time in 12 years, to invest up to 15% of their portfolio in international debt issued by supranationals of which Uruguay is a member.

The 18-month note is linked to the euro/dollar exchange

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