Podcast #28 – Building a Secure Future – Moments with Juan Manuel Valle
Doug Dvorak (00:03.897)
Good day Mission Podcast community. I’m your host and podcast navigator, Doug Dvorak. I’m so very excited to be chatting with my friend all the way from Mexico City, Manuel Valle. Hi Juan, how are you?
Juan Manuel Valle (00:19.246)
Hi dog Doug, very happy to be here with you.
Doug Dvorak (00:22.425)
High honor and principle stop three, two, one. High honor and privilege to have you on the Mission Possible podcast. But today on Mission Possible, as I mentioned, we’re joined by Juan Manuel Valle, the CEO of Afore Capel Coppel, one of Mexico’s leading retirement investment funds with a distinguished career in finance, public policy and economic development. Juan has been at the forefront of transforming.
how individuals and institutions plan for their financial future. Under his leadership, Afore Kapel Coppel has championed innovation, transparency, and long-term value, helping millions of people build security and confidence for retirement. In this conversation, we’ll explore the evolving world of retirement planning, the importance of financial literacy, and how smart investing today can create a more stable tomorrow. Juan, welcome to Mission Possible.
Juan Manuel Valle (01:21.282)
Hi, thank you. I’m very happy to be here and having the opportunity to discuss what I do on a daily basis with people that are probably not involved and probably don’t know a lot about how retirement system works in Mexico.
Doug Dvorak (01:40.079)
Thank you. And today’s title, Building a Secure Future, Retirement, Responsibility, and the New Investment Mindset. I’m an only child. I cared for my ailing parents. And I can only speak to retirement, the importance of it in this country. But don’t get old and don’t get sick and at least have some retirement funds that you can use. And you use a lot of them when you’re elderly and firm.
My mom, over a course of 10 years, I loved her to death. We went through, she had great care, but we went through and spent over $500,000 over 10 years for her care and getting old, getting infirmed or ill, and not having adequate retirement. And I remember what I think we shared when we were having coffee is what resonated with me early on, my mom.
drilled into me the importance of saving. Live beneath your means, save more than you spend and the power as Einstein said on his deathbed, what is some of the things you learned in your life, Albert? And he said, compound interest. And I remember my first $25 30 years ago when that was a lot of money when I was making 30 grand a year and the power of compounding is just amazing.
So Juan, you’ve had a chance to be a really, really strong intellectual in a number of different, in public, you were with the Mexican government in a very high position, you were educated at the Instituto Tecnológico Autónomo de México, one of the premier universities in Mexico City. Then you went to Princeton for a master’s degree in public and economic policy.
kind of sort of straddle both worlds and you’re always going to great investment conferences and meeting the best minds. But let’s start with your journey. What inspired you to lead a 4A Capal and focus your career on financial security and retirement planning for Mexicans?
Juan Manuel Valle (03:56.974)
I think part of the explanation is luck, part of the explanation is working hard, and part of the explanation is that I was in the right place at the right moment. So while I was studying college in Mexico in my second year, I went for advice with a good friend of my family who was a distinguished academic.
because I had been offered two jobs that week. I was studying, I was not thinking in working, but two offers came the same week, one from a professor and one from a friend’s father. And after listening carefully, he didn’t hesitate to tell me…
go and work for the professor. He’s not only a very smart guy, but he’s leading the implementation of a project, of a reform that will have a huge difference in the Mexican economy. And that reform was the pension system reform. So the fact that I started my career working when the reform was implemented,
is part of the explanation why am I today leading one of the pension funds in Mexico. So I was there at the beginning, I understood why we needed that reform, I understood the logic of the reform, I understood the impact both at the macro level and at the micro level of the reform if it went well, if it went in the right direction. And that’s where I started.
middle I did a lot of things mostly in government mostly in finance but I did some social development work or foreign affairs work but most of the time I spent it in finance and then at some point after 20 years in the public sector I have
Juan Manuel Valle (06:00.246)
a decision to make and it was whether I wanted to continue that path or I had a fantastic opportunity in the private sector and I took it and that opportunity was becoming the CEO of another pension fund. That was 2016, late 2016. So I took it, I went to run it and it seemed for me as if I had never left the pension system even though
had to go 20 years before to the moment I was working in the reform, everything was perfectly familiar. So it was very easy for me to
to just do my job and bring results to the project. I spent a couple of years on my own, doing my own projects, including some things around technology. In 2016, partnering with a friend and doing AI was a joke. Today, everyone thinks that AI has been there forever. But no, in 2016, no one understood even what we were doing. And then I came back to the system.
Doug Dvorak (07:03.299)
Mm-hmm.
Juan Manuel Valle (07:11.017)
A headhunter called me and they told me that they were looking for someone like me to run another pension fund to do different things. And I just thought, let’s go back. If there’s something in the private sector where I think I can have a huge impact both on the country and on the people, it’s in the pension system. It has a very differentiated
way of having impacts at different levels at different moments of time.
Doug Dvorak (07:47.823)
Excellent. you know, at least in the US, we’ve, depending on what numbers you look at by the US Census Department, approximately 350 million people every day, there’s 10,000 plus baby boomers like me retiring. For our audience, can you give us the landscape of the population that’s retiring? Who’s retiring? Do they have access to retirement funds? Just some data points on the Mexican.
population and the workforce and who’s got retirement and how you’re being impactful.
Juan Manuel Valle (08:21.997)
Okay, so in Mexico, first we have younger demographics, so you don’t have so many people retiring today. Then the majority of the people that are retiring today will be retiring under a defined contribution system. That’s a system where they contributed.
a defined benefit system, sorry. They contributed whatever they had to contribute, but they know what they are getting. And they are getting an amount based on the number of years they contributed and on the age at which they are retiring. But particularly in Mexico, you have a large part of the workforce that is informal. And that people are not retiring under the system.
they are getting, yes, a great economy, very big, probably among, yes, you have, today you have contributing to social security 22 million Mexicans, but you have working age closer to 50 million.
Doug Dvorak (09:13.753)
Would you refer to that as a gray economy, a black economy?
So they’re not in the system. I didn’t realize that existed in Mexico.
Juan Manuel Valle (09:38.22)
So that means that not everyone is contributing. And it’s not necessarily that those that don’t contribute don’t contribute always. And those that contribute contribute always. If we see our database, what we see is that 40 % of the workers are contributing on a given month.
But it’s not always the same. So what you have is at the higher income levels, more formality. At the lower income levels, less formality. So it’s not linear. Probably at the higher income levels, you have people contributing 80 % of the time. And at the lower income levels, you have people contributing 30 % of the time. So the group of people.
that are not in the formal sector, most of them are retiring with the pension that is granted for every citizen, that is $150 per month. That’s it. And whatever they…
Doug Dvorak (10:43.151)
That’s it? Wow.
Juan Manuel Valle (10:48.311)
could end up saving. The probability of people working in the informal sector and saving is low. we conduct surveys every couple of years, all the pension system institutions through our organization with those surveys. And we change the questions or we change what we want to get from the survey. But usually there are some questions that always are there. And among those questions is,
whether people are saving for retirement. And if we see the number of individual accounts that the Afores, the pension fund administrators have, we have like 70 million individual accounts. That’s like 70…
Doug Dvorak (11:34.095)
At a foray, you have $70 million.
Juan Manuel Valle (11:37.613)
at all the forests. So we have 70 million individual accounts. That’s more or less 75 % of the working age population. So almost everyone is there. But if we ask the people if they save for retirement, there would be a lot more than 25 % that will say that they don’t save for retirement. So they are not even aware that they have a pension account.
Doug Dvorak (11:39.085)
All of what is, okay.
Wow.
Juan Manuel Valle (12:07.414)
fund account.
Doug Dvorak (12:09.101)
And at what age are they able to draw that full pension by the Mexi-
Juan Manuel Valle (12:12.972)
at 65. Yes, you will retire with what you have saved in your account. So going back to those that are retiring today, when we conduct the service, if you ask people how are they retiring, the majority of the population will say, I’m not planning to retire. The reason for that is that they cannot afford to retire.
Doug Dvorak (12:15.215)
65
Juan Manuel Valle (12:42.326)
When you push on that and you ask how would you live when you retire? Who will provide? A lot of people say that they’re children. And even you have probably six years ago, 5 % of the respondents said God will provide. I have not seen that and I don’t think I will see it. So a lot of people will have a harsh
retirement or they will have a harsh late life. With the reform you have a lot more elements to make people aware that they have to save for retirement. Among other things, this is a privately run business. it’s in our best interest that at the end
people have money to retire and they can maximize what they have for retiring. So if we look at the old system, it was all the government and usually the government didn’t spend enough time or money making the case for people. In our case, we better do a good job in making it clear for people what are their options and how they can maximize those options.
Doug Dvorak (14:05.827)
very interesting. So Juan, how do you define financial well-being in today’s world or in Mexico, especially for working people planning for retirement?
Juan Manuel Valle (14:15.84)
Well, I think that would be a universal definition, financial well-being. So I think the first element is that you have to be able to have control.
Doug Dvorak (14:28.943)
Let’s stop. Let’s stop one one. Let’s there was some latency. Let me go back to that question. Sorry. Three, two, one one. How do you define financial well-being in today’s world or in Mexico, especially for working people planning for retirement?
Juan Manuel Valle (14:47.894)
Well, I think the definition is universal in terms of financial well-being. I think the first element is the present. You have to be able to have control of your day-to-day finances. You have to be able to meet your current needs and your obligations. That’s a must. Without that, the rest is just impossible.
The second is you have to be able to absorb a financial shock, somehow. So it could be savings or it could be insurance. There’s a lot that I have read about how many people in the US don’t have at least $400. That it’s the minimum you need to face an emergency.
Doug Dvorak (15:37.891)
That was just top of mind. read that data point. It’s a high amount. I think it’s 40 to 50 % of Americans don’t have $400 right now in savings for an emergency.
Juan Manuel Valle (15:50.761)
Exactly. And then the last component is having the freedom to make the choices that allow you to enjoy your life. And having the freedom is not necessarily only at retirement, no? Having the freedom to say no to a job today or to resign to your job because you have a cushion to move to what comes next.
That allows you to enjoy your life. Obviously, at the end, the most important part is you need to be able to make it when you are 60 or when you are 65. Or if you are very lucky when you are 55. And I think that is very, very important. I think those three elements have to be in any definition of financial well-being.
Doug Dvorak (16:43.279)
That’s great. So Juan, what makes a 4-8 Cappell unique in its approach to helping individuals prepare for retirement in the future?
Juan Manuel Valle (16:53.164)
I think there are couple of elements. just going back to what I said before, differently to the US where most of the people are retiring or will be retiring under defined contributions and most of the people have certainty of what they are getting as long as the system or the sponsor of the system doesn’t go bankrupt. In Mexico, for the majority of the workers,
Sorry, sorry, sorry, sorry, sorry, sorry.
I don’t know who let me just shut down the phone sorry
Doug Dvorak (17:32.249)
Take it, we’ll pause. No, take it if you need to.
Doug Dvorak (17:41.007)
Okay. You let’s start at the top. Three, two, one. Sure.
Juan Manuel Valle (17:41.417)
One second.
One second, let me have the… I don’t know why my… Okay, now they are connected. They disconnected because I got another call, I don’t know from whom.
Doug Dvorak (17:58.067)
your your buds. three, two, one, one. What makes a four a Capella unique in its approach to helping Mexicans prepare for their financial future and ultimately retirement?
Juan Manuel Valle (18:10.175)
Well, differently to the US, where most of the people are under a defined benefit system and they have certainty as long as the sponsor of the system doesn’t go bankrupt that they will be receiving a certain amount of money. In Mexico, most of the people will be retiring under a defined contribution system.
where they know how much they are accumulating and it will depend on them how much they will get at the end. Obviously there’s a backstop by the government that they provide a safety net but for the majority of the population they will end up retiring with what they save. Mandatory contributions are mostly paid by the employer and they are deposited in the individual accounts.
Afores are responsible for administering the accounts, for interacting with the customers, for solving any doubt they have, and for investing the resources. At the end, the most important complaint of people is that pension funds in Mexico are interested in them for getting them as customers.
and then we tend to ignore them. And I think that’s where we are unique. The way we were built and our target market is base of the pyramid. So, Aforico Pell is part of a holding company that has retail, has banking, but the base of the pyramid has always been the target.
So from the beginning we understood that we had to be good companions of our customers. We had to spend money and time in financial education.
Juan Manuel Valle (20:09.107)
we had to help them to understand which were the good decisions, which were the bad decisions. If you go to a store, you will see the price of the item if you paid cash. And you will see how much you pay if you want it on a monthly basis payment. And you will see what’s the difference at the end of the time. And it says after 12 months, you will end up paying this much. So,
people are able to decide with enough information if they want to buy something now and pay it during time or wait and pay it cash. So if we go to the pension fund, what we try to do in everything we undertake
is to be able to explain correctly to the customer what to expect. So if I look at my database, I am able to see for every customer how many months or how many weeks they have contributed. How are they in their path?
It doesn’t matter what age they have, they are 60 they are closer, but if they are 35 it’s still a long time. given their behavior, what they could expect at 65? Every year we send them a document next to their balance.
explaining how much they have, how much is interest, how much are contributions. If they continue that path, how much they will get in money, not with interest rates, not with percentages, with money. And how much that accumulated money will translate in a monthly payment, with the question if they believe that will be enough. And then…
Juan Manuel Valle (22:00.534)
we allow them to play with a calculator for voluntary savings. And if they want to put more money, they can put more money. For those that are an important number, that given how much they make, what seems to be the trend with wage increases, how many weeks they tend to contribute, we know those that could be really close to making the minimum weeks,
to grab access to the minimum pension. So if you make a certain number of weeks, it doesn’t matter if you don’t have enough money, you are allowed to receive a minimum pension under the system. That minimum pension is like $450 today.
So for those, the message is if you don’t work at least 200 more weeks in these five years, so that means that you have to be in the formal sector, you will miss the chance to get 450 that together with the 150 that everyone gets will put you in $600. So for a lot of people, for a lot of our customers, that’s a game changer.
That would be the difference between having to work or depend on their children or leave work and even help their children. given that we target the base of the pyramid and given that the company owners are highly engaged in the life of the company, they are very interested in the well-being of the customers.
Doug Dvorak (23:17.305)
Mm-hmm.
Juan Manuel Valle (23:41.929)
So we are allowed to spend money not only in financial education as a concept, but in working with behavioral economists in how we frame the messages, testing the messages, seeing how responsive people are to one message versus another, trying again. So we have done a lot of job that goes beyond administering the accounts and investing the money.
The most important thing for sure is investing the money. But even if we invest the money well, if we can’t change the behavior of many of our customers, they will end up in a worse shape than where they could be. And we feel that we have a commitment to helping them end up in the best shape they could retire.
Doug Dvorak (24:39.691)
Excellent. Juan, let’s transition to retirement planning realities. What are the most common misconceptions people have about retirement savings, especially in Mexico and Latin America and emerging markets?
Juan Manuel Valle (24:51.154)
I love you dog.
Doug Dvorak (24:55.759)
Hello? Can you hear me now?
Can you hear me now? One, testing one, two, three.
I can hear you, you can’t hear me?
Doug Dvorak (25:13.411)
Can’t hear me?
Juan Manuel Valle (25:18.472)
Well, I think that particularly… Can you listen to me? Yes.
Doug Dvorak (25:20.025)
Testing 1, 2, 3.
Can you hear me now?
Okay, let me ask the question again. I’m sorry. Three. I do. Perfect. Three, two, three. You can’t or? Yes, you can hear me? Okay. Yeah, I don’t know what happened here. Okay, three, two, one. Juan, let’s transition into another group of questions relative to retirement planning realities. What are the most common misconceptions? Yeah.
Juan Manuel Valle (25:28.126)
Yes, can you hear me? I can hear you. One, two, three, I can hear you. Yes, now I can.
Yes.
Juan Manuel Valle (25:47.604)
Can you hear me, dog? Yes? Can you hear me?
Juan Manuel Valle (25:56.638)
Dog. I, no, dog, you, I hear you like in and out, in and out, in and out.
Doug Dvorak (25:58.052)
You can’t hear me?
Doug Dvorak (26:07.465)
I know I got it. Can you hear me now?
Juan Manuel Valle (26:08.917)
Yes, but I can’t hear you well. You are like going out of the…
Doug Dvorak (26:16.523)
Okay, let me just check one thing here.
How about now? Is that better?
Doug Dvorak (26:27.371)
Is that better now?
Can you hear me now?
Doug Dvorak (26:36.303)
Can you hear me now, Juan?
Juan Manuel Valle (26:50.718)
No, I-
Doug Dvorak (26:51.183)
Testing 1, 2, 3 testing.
Doug Dvorak (26:56.996)
Go ahead.
Juan Manuel Valle (26:57.862)
It’s still like cutting.
not better but not perfect and even the image is frozen even your image is frozen
Doug Dvorak (27:04.47)
Is there some latency?
Doug Dvorak (27:13.219)
My image is frozen.
Weird. Weird. Let me,
Doug Dvorak (27:24.559)
What’s up?
Doug Dvorak (27:27.885)
I’ve got.
Doug Dvorak (27:41.849)
Can you hear me now?
Doug Dvorak (27:55.727)
Hold on a second.
Doug Dvorak (27:59.663)
Am I still, can you hear me?
Doug Dvorak (28:05.025)
Is my image still latent?
Doug Dvorak (28:11.875)
Can you hear me okay now, Juan?
Juan Manuel Valle (28:16.36)
I can hear you but I still think there’s latency and your image is still frozen.
Doug Dvorak (28:16.653)
Hey Juan, can you hear me now?
Doug Dvorak (28:27.151)
Okay, let me stop recording and let me…
Doug Dvorak (00:01.265)
Juan, let’s now talk about retirement planning realities. What are the most common misconceptions people have about retirement savings, especially in Latin America, Mexico, and emerging markets?
Juan Manuel Valle (00:14.606)
I think the most important misconception in Mexico, and in Latin America I think, is that a lot of people still believe that their kids will pay for the retirement, that there will be solidarity. And I think just as with the…
Doug Dvorak (00:29.073)
Oops. Let’s start again. Let’s start again. I had my glasses on. I’m sorry. All right. Disregard that a minute. Here we go. Three, two, one. Juan, let’s talk about some retirement planning realities. What are the most common misconceptions people have about retirement in Latin America to include Mexico and emerging markets?
Juan Manuel Valle (00:53.08)
Well, I think particularly for Latin America and Mexico, I think a lot of families, a lot of people still put a high probability that it will be their kids making the needs for when they retire. And I think demographics are just not there. Probably when there were 10 kids and people live until 60.
that could work and it would be one tenth of your wage to make for your parents. But when there are two kids…
I think it’s harder and when people live longer, it’s harder and when you put the pressure of health, it’s harder. So I think in general, the possibility of that happening, I think it’s a misconception. Now, taking that part of informality away and considering only the formal workers, I think that the misconceptions are again universal. I think they tend to be similar no matter where we are.
And I think the most important one is a present bias.
where we give disproportionately higher weight to immediate rewards than to future ones, even if the future ones are larger. I think that happens, unless you sit down and do the numbers and do the math and are willing to make a commitment, that will be something that everyone will do. Spend today versus save for retirement. So you have the instant gratification bias,
Juan Manuel Valle (02:35.354)
human brain is wired in such a way that we seek pleasure and avoid pain and temporal saving instead of spending is painful we don’t want to do that no then temporal discounting no that’s another important one no we just don’t know how to compound interest
Doug Dvorak (02:50.704)
It is.
Juan Manuel Valle (03:01.452)
We don’t know and we can try with anyone at any point and if you ask people $10,000 today or X in 10 years, they will hardly do the right number to see what’s a perfect match of one amount today and the other amount tomorrow. Loss aversion.
No, spending is not a, not spending is a perceived loss. No.
instead of seeing savings as a future gain. That’s another way of seeing it. And then we tend to be optimists. And that optimism in this particular area, we overestimate our ability for saving in the future. So we think we can start tomorrow.
That’s not the good response. We should start today so that we are able to accomplish our goals.
Doug Dvorak (04:07.091)
So that leads me into another question. How early should people start planning for retirement? And what’s the biggest advantage of starting young?
Juan Manuel Valle (04:15.896)
Personally, I think that we should teach kids to save when they’re in high school. Personally, I believe that a math curricula, even from elementary school, should be based on everyday decisions.
not in abstract concepts. So I think everyday decisions are crucial. So for example, in the US, a very big player on the ETFs market has a very interesting program that is My Classroom Economy. And it’s focused in high school students. And making…
a high school student understand that he has to save, he or she has to save from day one when they start making money, I think it’s crucial. And again, going back to compounding, if you start at 21, that’s college age, and if you start working and you save $5,000, that would be a lot at that moment, but during time…
it probably is not so much. If you save from age 21 to age 60, $5,000 per year, compounded at 5 % per year, at age 60, just only with that, you will have $620,000. If instead of doing that,
You say, no, no, let me go through college. I don’t want to work or I can’t work. I don’t want to save. And once you are done with college, no, I’m starting. I will do more money later and I will be able to save. And you decide that at 30, it’s OK. Now you can save $5,000. It’s only 10 years. No, if we think it’s only 10 years, it’s $50,000. No, it’s not so much.
Juan Manuel Valle (06:18.607)
you will have $340,000. So the difference is almost 310 years only. So the power of compounding is something that you need to learn and understand early. And if you are able to save whatever amount, but be disciplined in saving from the first job you have, you will probably have
Doug Dvorak (06:22.523)
Almost half, just waiting 10 years.
Juan Manuel Valle (06:45.097)
a good opportunity to have a good retirement.
Doug Dvorak (06:51.667)
the importance of starting early and the magic of compounding. So Juan, how do economic shifts such as inflation, interest rates and demographic trends impact long-term investment strategies for retirees?
Juan Manuel Valle (07:08.365)
When we work, we do it on a yearly basis. So every year we review…
what we expect from the different asset classes and the different returns. And they incorporate many variables. So if we think of inflation, if we think of interest rates, there’s something that is missing there at the end, that is growth. Because at the end, the growth component will explain the difference between inflation and interest rates. Growth and productivity are very important. And then on the other side, we will do the demographics.
So inflation in general is painful. The higher the inflation, the lower the possibility of having high real interest rates.
because the economy will not work under the stress that high inflation puts on that. So inflation is bad. High interest rates are good for savings, but are bad for the economy.
And we have seen it in the last years and the best example is the US. People saving are very happy, fixed income became the coolest asset, but it’s not good for the economy. It makes it harder for lot of companies to be able to invest and to do things that will end up impacting productivity.
Juan Manuel Valle (08:40.575)
And then growth. The more the growth, the higher the returns you will be able to get on your savings, assuming that we have a diversified portfolio that includes not only debt, but also equity. And then the demographics play against, because the longer you live, the more you need to accumulate, or the longer you need to work.
has a political component that is really complex. No one wants to be the president or the leader who increases retirement age by one year. No? But let’s think that we don’t run on a government scheme. It’s our money. Well, we have to make the decision. We have our savings, we have our path, and we do the numbers.
it seems that I will be able to live one year more or at least the annuity I’m going to purchase is saying that now the expectation is one year more. So if I stop today with what I have accumulated today, they are calculating a smaller payment. It’s my call. I can either live with less money.
or I can work one more year. The problem is that when it’s on the government to make the call because the system is a defined benefit system, everyone says, no, you can’t do that. Well, the problem is that it doesn’t work. Unless someone makes the call, someone will have a bad time. So I think that’s the way they work.
particularly for the US, I think the capacity of the economy to generate good returns has allowed for not having a tough discussion on retirement age as of today, something that you are seeing more in Europe.
Doug Dvorak (10:46.621)
So let’s talk about investment insights. What are some of the smartest investment strategies for individuals approaching mid-career and nearing retirement age? So let me, before you answer, start early. The power of compounding interest, but what are some of the smartest investment strategies for people approaching mid-career or nearing retirement age?
Juan Manuel Valle (11:09.677)
I think in general, discipline. No, again, start early and be disciplined. No, if you are going to save 1,000, save 1,000. If you are going to do a portfolio that has fixed income equity,
Do it on a monthly basis. You will not beat the market. A general individual. Even an expert will have a bad time probably. But a general individual, don’t try to time the market. You can go, there’s a very good book on psychology.
around financial decisions and they run numbers of people saving one dollar every day through sun and rain and people trying to time the market by some indicators of employment and living early and entering back, etc. etc. And the conclusion is that those that had the best outcome were the ones that were constant in saving. Again,
Doug Dvorak (12:13.427)
It’s a fool’s errand to try to time the market. It’s a fool’s errand. I tried it in the past and it’s a fool’s errand. Stay in, stay disciplined, the magic of compounding. So given the volatility of business cycles and the global financial crisis and this and that, how does a 4-8 Coppell balance risk and growth for its investors?
Juan Manuel Valle (12:16.671)
Exactly.
Juan Manuel Valle (12:39.948)
We run under a system that is a target date fund system, very similar to what you can get in many institutions in the US. And what that implies is that for the younger groups, those entering the system, the exposure to equity and private equity is a lot larger. As you move closer to retirement,
that exposure goes down and the exposure to fixed income and private credit is bigger. Why? In the longer term, these more risky assets in the long run will pay well. The problem is if it’s not in the long run and you need to live at a bad time, you will lose money. So the way it is designed,
allows to minimize the possibility of someone losing a lot of money because a very bad day or a very bad year or a couple of years of a tough recession. So in the earlier part of your career, you should be willing to take a riskier approach. You don’t need to invest in government securities at that age.
The closer you get to retirement, you should seriously focus in fixed income. Even if you didn’t get or you are not getting what you expected, the risk of trying in those last years to make for what you are missing by doing riskier strategies, you are losing to…
to lose more and that’s a bad idea. So in the mid-career you should be willing to analyze better what you could do on the riskier side of the spectrum with equity and with private equity. The older you grow, you should de-risk and move to less risky strategies. You can do that.
Juan Manuel Valle (14:57.416)
or you can just get into a target date fund and they will do it for you. No, it depends. Personally, being a finance person, I do like to have a certain proportion of my savings where I make the calls.
don’t like to time the market. I don’t try to time the market because I don’t have time on a daily basis to enter and trade. What I try to do is once a year sit down, read a lot more into deep things that I have been listening to, reading about, and build a portfolio on that small part.
for the next couple of years. And including that portfolio, what’s my expected price? And when I get my expected price, I sell. but you missed that? I missed probably, but that was my target price. I did my analysis. I think I did a good analysis. That’s my price. Let’s go out. And again.
Doug Dvorak (16:10.183)
And I’m sure you heard the Wall Street saying, the bulls make money, the bears lose money, and the pigs get slaughtered.
Doug Dvorak (16:22.031)
And you and I chatted about a year ago about your boutique portfolio that you combine. So that leads me into my next question. What are your thoughts on crypto as an asset class? That’s the first question. And then looking forward, what are some? And again, this is a podcast. We are not giving investment advice. We’re just asking you, what do you think about crypto as an asset class? First question. And then follow up to that.
Juan Manuel Valle (16:22.303)
Exactly.
Doug Dvorak (16:50.149)
What sectors are you excited about?
Juan Manuel Valle (16:53.332)
I don’t like crypto. I don’t like crypto just as I don’t like gambling. I think that crypto is gambling. I think that most of the money that has been made in crypto is because there’s a lot of people that have been entering because of the hype and there’s…
Doug Dvorak (16:55.912)
Because
Doug Dvorak (17:14.973)
Pump and dump.
Juan Manuel Valle (17:16.414)
And there’s very smart people that can build very sophisticated algorithms that are trading on the ignorant.
No, they are able to get in at the right timing and get out because they have the capacity and now the technology allows you to process so much information that you can get in and out, in and out immediately. No, so I don’t like crypto. And personally, I think that it’s something that goes against
the institutions and the governments. I think it’s something that helps with evasion, with corruption, with money laundering. No? Because you can move it at any point, wherever, and there’s no one who… I don’t think that’s the world I want to live in. I think I prefer a more organized world where whoever is holding the reserves guarantees me
that I will get my money back. I think blockchain is a fantastic thing for many other things like property. I think using blockchain for trading anything else is really good.
No, because it’s a lot more efficient, but particularly for currencies, I don’t think that’s where I want to go and I personally don’t invest in crypto. My partner in the technology company, he has his portfolio, he has worked with algorithms and he has done fantastically well. Again, when I discussed with him,
Juan Manuel Valle (19:05.041)
everything he says confers my theory. He is gambling with how the information is moving and how people are losing money on something that is really really hard to understand. There’s no underlying value behind and that’s hard to deal with.
Doug Dvorak (19:28.057)
Excellent. What are some asset classes that particularly excite you outside of crypto?
Juan Manuel Valle (19:34.559)
Well, I love private equity. I do believe that working with the very good private equity general partners is a fantastic opportunity. I think they are amazingly good. I think they are amazingly serious. I think they do have a lot of skin in the game. No, I think they have performed really well and
And we have a very diversified portfolio in private equity. So we do venture and I love what I see around technology. We like a lot health. We like a lot software. Then we do a lot more on the small and mid-market companies.
There are lot of opportunities in the US, but there are a lot more in Europe. I think that’s a very attractive market in Europe. And recently, we have been looking a lot to infrastructure. We believe that there are a lot of opportunities there, particularly, well, I think worldwide, but I think in Mexico, there are a lot of opportunities. And it’s an asset with a very long…
way to go. It’s not 10 years easily we can run on the same asset for 30 years. It will provide very attractive returns. It is pegged to inflation so you will get real returns every year and you are having an impact. So if I go now to Mexico besides infra
we have been working different things on nearshoring. So we believe that there are lot of opportunities in nearshoring. I believe private credit is attractive and not even though it’s credit, the returns are closer to private equity.
Juan Manuel Valle (21:49.726)
And the reason is that all around the world, in the US and in Mexico, the banks have left a gap for companies. So if you’re a very small company, you get a parametric, you get a certain amount, everyone gets the same rate, and that allows you for liquidity and helps you to do some things. But if you’re a company that are growing very fast, that model doesn’t work.
you need something with a lot more flexibility. You tend to be not sensitive to the interest rate. even if it’s that same interest rate, as long as you have flexibility on the timeframe for the loan, how fast they solve for the loan, it’s good for you. So you can get, as an investor, very good returns and be linked.
to grow companies. Again, we see that a lot in Mexico because we see a big gap from the banks not providing enough flexibility for small companies and then they catch them back when they are going to go public. But in between, we can do a lot of very good investments there.
But if you ask me only one thing that I really like, technology.
Doug Dvorak (23:13.639)
technology. So let’s talk about leadership and innovation as the CEO. How has your leadership philosophy evolved during your time as CEO of a 4A Coupelle?
Juan Manuel Valle (23:26.987)
Well, I think it has not changed so much. think my leadership style was framed before and I have been able to execute even in a new organization. When I arrived, I had six…
people that reported to me. Today I have eight because I created a couple of areas. Out of the six original ones, there’s only one that changed. And he changed because he was moved to another area and I had to hire someone. It was not that I pushed him away. And the two new areas are people that came with me. So I work with who I have. But I’m very clear from the beginning.
what is what I expect them to accomplish. I have a method, I am very disciplined on the analysis, where we want to go, more or less what I think is the best way of going, but I give full independence to the team. They know they have the flexibility and the independence to do things, they know when they need to come back, and they know they have to deliver.
And it has worked really, really well. People are happy. People love the dynamic. There are weeks that I see them Monday morning because I have a meeting with all the team to see if there’s anything, particularly if there’s anything between two of them that they couldn’t solve, where I need to intervene. And to catch up on things that they consider that are important for sharing for the rest.
Probably the rest of the week I see two or three of them in very specific topics and I spend the time going back and forth on what are the results, where I think I need more information, ask them. But everything works. The results have been spectacular.
Juan Manuel Valle (25:29.702)
I push them to innovate, you I’m really into innovation. In every area I have tried to have at least one project where they are able to identify something for AI.
can be part of the solution. I think it’s important not for me to bring something to the table and ask them to execute, but for them to better understand what the opportunities are and where they believe they should focus. Everything that is being done has a reason.
For me, as a leader, it’s not acceptable. No, because no, or yes, because I said so. In general, everything, the strategy has a perfect narrative on where we were starting, what were the problems, why this solution seems to be the more feasible one, and what are the expected results. And we follow on that. When we’re implementing every month or every couple of months,
depending on the project, we look at the project with people at all the levels and usually expecting from those executing to explain what they are doing, to feel comfortable interacting with me and with the rest of the people and that…
helps them to grow also and on a monthly basis on the business as usual what are we looking concentrating on where’s the difference between what we expected and what resulted I hate to waste time looking at the numbers when everything is perfectly aligned with the budgeting if that’s we did a fantastic job in the budgeting I don’t need to see anything everything is green don’t explain
Juan Manuel Valle (27:24.672)
anything. no, this is green but 20 % above or this is red because it’s 5 % below. Okay, let’s dig into both. Did we did a mistake when we did the budget or what trend came that allowed us to have a huge positive impact?
On the negative, the same. What happened? Did we forgot something? Something changed? So it is very efficient because people can really concentrate in doing the work and not losing time making presentations or discussing what is the expected outcome.
Doug Dvorak (28:08.883)
Excellent. Let’s talk about global and future perspective. What lessons can other countries learn from Mexico’s retirement system?
Juan Manuel Valle (28:16.33)
I think having an individual account system with defined contributions and making people responsible of what they get combined with the possibility of saving voluntary on their own, saving on their own in excess of that and having a safety net is the best way to go.
among other things because it takes away all the political elements that make it very complicated to make the changes that all the countries will need to make just because of demographics. And I think that people are responsible for their futures. They should be completely engaged. And if you don’t give them some responsibility in the process,
They just expect the outcome and are never concerned. And if there’s some discussion, if they are getting less, they feel that they deserve the extra. And they will never enter into what happened in the system or in demographics to make that change necessary.
Doug Dvorak (29:26.909)
So let’s talk about demographics. Western Europe, the US, most industrialized nations, the population growth rate is not enough. It’s going to be at zero or declining. Korea, Japan, Germany. What’s that like in your global macro view? And is that a real?
hornets nest or area of concern for people who are about to retire. Too many people retiring and not enough people paying in.
Juan Manuel Valle (29:58.218)
think it will be painful political decisions. think governments will need, at some point will be inevitable that they will have to act and they will suffer the consequences. No? But it’s easy.
Doug Dvorak (30:13.275)
Raising raising the retirement age even more or additional taxes. How do you see that playing out? And what’s the timeline in your judgment?
Juan Manuel Valle (30:19.913)
Both. I think it will be a combination. I think they will need to raise the retirement age and I think they will need to put some more fiscal funding to cover for the gap. How soon? Well, I think the Europeans are already seeing the problem. They are already discussing and in some countries even they have increased one year the retirement age. So I think they are aware now.
And it’s starting now. When I think that the first case will explode or we will see a huge reaction to that, I think probably in 10 years in Europe, we will see at least one case where it will be a tough discussion between the citizens and the government on what’s the way to go.
Doug Dvorak (31:21.107)
Excellent. So Juan, I’ve really enjoyed our conversation. The last piece of our conversation or podcast is called rapid fire round of questions. I’m going to ask you five questions, one word or short response. Are you ready?
the best financial advice you’ve ever received.
Juan Manuel Valle (31:36.605)
Yes.
Start saving early.
Doug Dvorak (31:41.691)
a book or mentor who shaped your leadership style.
Juan Manuel Valle (31:45.993)
Jose Antonio Meade was my boss for 20 years and I think everything I do today is mostly what I learned from him.
Doug Dvorak (31:55.079)
What’s one financial myth you’d love to debunk right now?
Juan Manuel Valle (32:01.672)
When I go to an event and I ask people who is saving for retirement, please raise your phones. Who is not saving for retirement because you don’t have enough money and raise your phones? And I see a lot of the last version of the iPhone. I say, you are not saving because you don’t want to save, not because you can’t. Also, people making the case that they don’t have enough because they cannot control their spending, that’s a myth.
Doug Dvorak (32:32.019)
Excellent. So if you weren’t the CEO leading a 4A Copel, what career would you choose?
Juan Manuel Valle (32:38.985)
there are many things that I love whatever I would do it’s because I love it that’s the only condition
If I don’t really enjoy what I do, I would not do it. If I go back, I would have been a lawyer and I think I would have been a good lawyer. I worked in public service. I loved public service. I could be a public servant. As you know, I love the restaurant industry and I think I could be very good, not as a chef, but I could be a very good restaurateur. And the last one that is not so obvious…
I love behavioral economics. So I think the way it combines psychology with economics, I think I would love to do that. So when I undertake projects with behavioral economics, I love to have discussions with the behavioral scientists because I think it’s fascinating.
Doug Dvorak (33:39.473)
I would agree. Last question, finish this sentence. A good retirement plan is…
Juan Manuel Valle (33:45.971)
the one you start very early.
Doug Dvorak (33:48.743)
love it. We’ve been talking almost 90 minutes with a couple of hiccups on the tech. But my guest today on Mission Possible has been Juan Manuel Valle, the CEO of Afore Copel Coppel, one of Mexico’s leading retirement investment funds. Juan, I certainly grew financially as a result of this. Thank you for your time. It’s been a high honor and privilege. And our Mission Possible podcast, Nason, check us out on Spotify, YouTube.
Apple and Mission Possible.biz. Good selling and good savings and Carpe Diem.
Juan Manuel Valle (34:26.045)
Thank you, Doug. It was a pleasure.
Doug Dvorak (34:28.211)
All right, let me stop this, don’t leave yet.