Top banks joining ETF bandwagon

MANILA, Philippines - BDO Unibank Inc. and the Bank of the Philippine Islands (BPI) have expressed interest in launching exchange traded funds (ETFs).

An exchange-traded fund (ETF) is an investment fund traded on stock exchanges and commodities, or bonds, and trades close to its net asset value (NAV).

BPI president and chief executive officer Aurelio Luis R. Montinola III said the bank supports the introduction of new investment products.

“Anything that can improve the domestic financial and capital markets, anything that can offer another investment option for the investing public,” he said.

BPI senior vice president Maria Theresa M. Javier said the bank joined the technical working group of the Securities and Exchange Commission (SEC), which drafted SEC Memorandum Circular 10.

The circular laid out the implementing rules and regulations for the ETF.

Javier, who also heads BPI’s asset management group, said that the bank was studying ways of incorporating ETFs into its basket of investment instruments, which includes trust funds and unit investment trust funds (UITFs).

“There are many benefits from investing in ETFs as these are designed as low cost investment vehicles that allow small investors to participate in the Philippine growth story.

It gives investors the opportunity to participate in the returns from Philippine asset markets through a diversified portfolio of stocks or bonds,” she explained.

Javier said that the introduction of ETFs would complement the existing funds in the market, including mutual funds, as it would address various investment objectives.

“ETFs complement the growing lineup of diversified pooled fund vehicles in the market, including BPI existing roster of index-tracker funds, thus will offer wider choices for various customer segments we serve,” she said.

BDO executive vice president and head of trust and investment group Ador A. Abrogena said they were also part of the private sector group that helped craft the ETF rules.

“We are hoping that these regulations would make the environment conducive for the launch and operations of ETFs just like in other jurisdictions. We expect the ETFs to have tremendous impact on capital market development,” Abrogena added.

He explained that the ETF would be an open end investment composed of a pool of securities, much like the traditional mutual funds.

However, the shares in an ETF can be bought and sold anytime of the day like stocks in an exchange through a broker.

They are designed to track the performance of an index and provide ready access to a market.

Meanwhile, Philam Asset Management Inc. (Pami) chief executive officer Karen Liza M. Roa said that they were not about to jump onboard the ETF wagon.

Pami is the fund manager of several mutual funds and a subsidiary of the Philippine American Life and General Insurance Co. (Philam Life).

“Pami has not included the ETF product in its short-term product pipeline. We would rather observe the appetite of the market toward these kinds of products,” Roa said, adding that they were always looking albeit cautious for new products for its clients.

She explained that they were still comfortable with actively-managed funds. But she said that one of the benefits of a passive investment vehicle such as the ETF is that fees are minimal and operating costs lower than that of mutual or trust funds.