SEC urges public to invest in mutual fund firms

The Securities and Exchange Commission is urging the public to invest in mutual fund firms rather than in get-rich-quick schemes which more often than not leave many investors with an empty savings account.

"Instead of putting your money in scam, put it in the market. Another alternative is to invest in mutual fund firms," an SEC official said.

The SEC official said the public should learn from the string of investment scams that have been exposed last year and should think twice before parting with their hard-earned money.

Thousands of investors have been victimized by these get-rich-quick schemes which offer high investment returns in just a short period of time.

Mutual funds bring together multiple investors to form pools of invisible funds that afford individual stockholders the same economical access to capital markets as larger and wealthy investors.

The funds may be invested in debt securities/bond issues, equities or a combination of both depending on market conditions.

The Philippine mutual fund industry is minuscule compared to other markets overseas, owing in part to the cautious attitude of the government towards the sector in the past.

As of end-December 1998, the industry had only P3.3 billion in total assets, less than 0.02 percent of total market capitalization. The 14 open-end funds, had less than 6,000 shareholders, representing less than 0.001 percent of the total number of Philippine households.

In addition to the lack of awareness and education, mutual funds are faced with the relatively small size of sales centers and offices unlike common trust funds which enjoy the huge advantage of being able to exploit the vast distribution network of most universal banks.

Capital market players said another reason that Philippine mutual funds are so small is due to the unfortunate history of mutual funds in the country dating back to the 1950’s. Although the industry flourished for several years, the industry collapsed due to lack of proper rules and guidelines and illegal sales practices of unscrupulous investment companies.

Among the country’s mutual fund companies are Philam Bond, Philam Strategic Growth Fund, Philequity Fund, Sunlife’s own SLC Prosperity Philippine Equity Fund, United Fund, the GSIS Kabuhayan Fund, First Galleon Fund, Citisec Growth and Income Fund, All Asia Fund and the Ayala Life Fixed Income Fund.

The PSE is currently studying the marketing and possible listing of more mutual funds which at present are limited to the locally-listed Filipino Fund Inc. and the New York-traded First Philippine Fund.

Sun Life Asset Management Co. Inc., a unit of the listed insurance giant Sun Life of Canada, has manifested its interest in marketing mutual funds through the exchange. This will be coursed through the trading participants initially as distributors of mutual funds and ultimately as traders upon listing with the exchange.

The PSE said this will provide another source of income to the brokers through distribution fees or trading commission. Brokers, however, will first need to pass an examination and obtain a license from the SEC before they can enter into a distribution agreement with the mutual fund company to sell and offer the mutual funds to clients.

At present, the PSE deals only in a limited number of securities which include common stocks, preferred stocks, warrants, depository receipts, the small-denominated treasury bonds and Treasury bills.