In 1981, Chile replaced the former pay-as-you-go system with a new system based on
individual capitalization, private administration of assets, free choice of fund managers, and state oversight
of the normal functioning of the companies. The state imposes a minimum guaranteed return for
investments and requires that companies hold assets as reserves to cover that guarantee. This requirement
generates a herding behavior among companies. We simulate scenarios for pension fund administrators
that deviate from the norm in their investment strategies. We find that the reserve requirement is overfunded
under the actual conditions.