Mexico's mutual funds expanded 18 pct last year

MEXICO CITY, Feb 18 (Reuters) - Assets held by Mexico's mutual funds increased by 18 percent last year to $80 billion, with portfolio managers buying slightly more corporate debt, although government paper still accounted for most assets.

Fast-expanding mutual funds and pension funds have become become big players in Mexico's financial markets in recent years, providing steady demand for local investments.

At the end of December, Mexico-based mutual funds had upped their exposure to corporate debt slightly to 10.5 percent from 9.1 percent in the year-ago period, the National Banking and Securities Commission said in a report on Monday.

Government debt accounted for 60.2 percent of mutual funds' assets at the end of the year, down marginally from 60.60 percent the year before, the commission said.

Exposure to stocks was 10.8 percent, down slightly from 11.4 percent in January 2006.

The increasing role of pension and mutual funds, run mostly by big banks like Citigroup (C.N: Quote, Profile, Research) and BBVA (BBVA.MC: Quote, Profile, Research), in Mexico's financial sector makes markets slightly less dependent on massive foreign players, economists say.

That could add some stability to Mexican assets as foreign investors worry the U.S. economy could slide into a recession this year.

Pension and mutual funds, along with insurance companies, have accounted for most of the demand so far in Mexico's small but fast-growing mortgage-back debt market.

Assets of Mexico's private pension funds were worth about $78 billion at the end of January.