Mutual funds allowed higher investment cap

MANILA, Philippines - Investment companies, particularly mutual fund firms, are now allowed to allocate more resources in a single business entity.

In a memorandum, the Securities and Exchange Commission (SEC) said it amended several sections of Rule 35 of the Investment Company Act.

Specifically, the corporate regulator increased the cap on the maximum investment in a single company while allowing mutual funds to allot less resources on liquid assets.

“The maximum investment of an investment company in any single enterprise shall not exceed an amount equivalent to 15 percent of the investment company’s net asset value except obligations of the Philippine government and its instrumentalities,” SEC said.

Prior to the amendment, maximum single entity investment of a mutual fund was pegged at 10 percent of the investment firm’s net asset value.

SEC retained the rules barring mutual funds from owning more than 10 percent of the outstanding shares of an investee company.

An investment company refers to any entity engaged primarily in the business of investing, reinvesting, and trading of securities.

The SEC also loosened the liquidity requirements for mutual funds.

“For liquidity purposes, unless otherwise prescribed by the SEC, at least five percent of an open-ended company fund shall be invested in liquid or semi-liquid assets,” said SEC, which relaxed the rules from the previous 10 percent requirement.

An open-ended company, or a mutual fund company, is an investment firm offering for sale, or has outstanding, any redeemable security. It owns a pool of assets that regularly sells and redeems its shares.

SEC requires mutual funds to set aside a portion of their resources in liquid and semi-liquid assets like Treasury bills, debt papers issued by the Bangko Sentral ng Pilipinas, and savings or time deposits with government-owned banks or commercial banks.

“The open-end company fund shall submit a liquidity contingency plan to the SEC before it implements a decreased investment of less than 10 percent in liquid or semi-liquid assets,” SEC said.

The country’s mutual fund industry has assets under management (AUM) worth a record P146.2 billion as of end-2012, surging 41.1 percent from P103.6 billion in end-2011, data from the Philippine Investment Funds Association Inc. (PIFA) showed.

Total customer accounts ballooned to a record 166,097 customer accounts in 2012, up more than 30 percent from 125,863 in 2011.

PIFA is the trade organization of the country’s fledging mutual fund industry. To date, there are four basic mutual funds – the bond or fixed income fund, the equity fund, the balanced fund and the money market fund.

Among the leading fund managers of the country’s mutual funds are BPI Investment Management Inc., PhilEquity Management Inc., Philam Asset Management Inc., FMIC Asset Management Inc., Sun Life Asset Management Corp., and Grepalife Asset Management Corp.