Funds want to join bancassurance bandwagon

After the insurance and pre-need industry had sought from the Bangko Sentral ng Pilipinas (BSP) the green light to sell its products within the premises of commercial banks, it is now the turn of the mutual fund industry to seek similar privileges.

The country’s mutual fund industry registered a combined net asset of P23.63 billion as of end September this year. The amount represents an all-time high for the 12-year-old non-banking financial sector, and it represents a 107-percent increase from the P11.4 billion registered for the full year 2001.

Total equity investments made so far reached P2.22 billion after the first nine months majority of which were placed in government securities, Treasury bills and bonds, and the equities market.

The country’s banking system is the widest distributed financial system capable of marketing financial products outside of its own banking products. In most countries globally, banks serve as the alternative distribution network of insurance companies and mutual funds institutions.

Rolando A. Robles, president of the Sun Life Asset Management Co. Inc. (SLAMC), points to the banking system as a major distribution channel for marketing mutual fund products. This in turn could contribute significantly to the development of the capital markets as well as increase the national savings level.

"Despite the absence of direct marketing through the banking system, the mutual fund industry has already contributed significantly to the country’s capital markets and national savings," Robles said.

It has also served as an alternative to the low-interest rate regime of the regular savings deposits and time deposits. The mutual fund industry has also been a major player in the country’s bond market.

The Sun Life Prosperity Bond Fund, for example, has a net annualized return of 10.54 percent in 2001 while as of mid-November this year, its rated at 8.47 percent. This is better than the regular savings net rate of less than two percent with commercial banks.

The SLAMC president clarified though that selling its products through the banks (otherwise known as bancassurance in the insurance sector) also benefits the banks itself as fee-based income.

Most banks had admitted that fee-based income has slowly outpaced its interest-based income. Fee-based income are services rendered by the bank in behalf of other companies or sectors such as remittances of overseas Filipino workers (OFWs), payments of utilities, telecommunications, taxes, insurance and pre-need premiums, and soon bancassurance.