Mutual fund assets hit record high in Oct

MANILA, Philippines - The total assets under management (AUM) of the country’s mutual fund industry has set another record asset value level worth P136 billion at the end of October this year, up 36 percent from the P124.5 billion realized end June.

The total number of retail accounts is likewise nearing the record level registered in 2008. By the end of October, it has reached 156,335 accounts from the end July count of 145,618.

Based on data furnished by the Philippine Investment Funds Association Inc. (Pifa), trade organization of the country’s mutual fund industry, the bond or fixed income funds remained the largest at P74.4 billion.

That is a whopping 64-percent leap from the P54.1 billion recorded in the first six months of 2012.

Total net asset value of equity mutual funds was the second biggest worth P33.9 billion end October, which is an increase of nearly 24 percent from the P28.4 billion in July.

The total net asset value of balanced mutual funds ballooned to P26.2 billion which is a 16-percent expansion from the P22 billion end June.

US-dollar denominated balanced mutual funds reported net assets worth P1.99 billion while dollar and euro-denominated bonds funds was worth P17 billion.

Pifa chairman Fernando Jose Sison III said that the strong performance of the country’s mutual fund industry shows the growing maturity and sophistication of the investing public.

“They are not content with the very low interest rate environ of savings accounts in banks,” Sison, who is also president of BPI Investment Management Inc. (BIMI), said.

He said that the Filipino investor remains generally “modestly conservative” as reflected in the huge fixed income fund asset value over the equity funds.

Fixed income or bond funds are considered fit for investors with a conservative outlook.

These funds are invested in government securities and corporate debt papers that are considered “safe” though the down side is it offered a relative lower return.

In contrast, equity funds are the riskier investment type but with the highest returns.

Looking at the present list of investors or accounts, there are more accounts in the fixed income funds (52,310) over those invested in the equity funds (49,600).

However, Sison took note of the increasing number of investors “taking a more aggressive position.”

In fact, the balanced mutual funds accounted for the most number of accounts reaching 52,771.

Balanced mutual funds are a mix of fixed and equity funds. The mix depends on the investment philosophy of the fund manager.

The country’s bourse continuous its march towards record levels, which prompted some fund managers to allocate 60:40 ratio, or 60-percent invested in equities and 40-percent in fixed income.

The more aggressive fund managers go as high as 80-percent equities.

Sison, however, noted that in most developed and developing Asian countries, the dominant investment mode is aggressive thus extremely high investments in the equity market and a very poor second in fixed income.

A mutual fund is a registered company, which is basically a pool of funds from many individual and institutional investors, and managed by professional licensed fund managers.

Each fund is invested in stocks or equities, bonds or fixed income, balanced (a mix of equities and fixed income), and short-term money market instruments.

These are generally peso-denominated although a few are US dollar or euro denominated.

It is marked-to-market or its rate of growth depends in the performance of the funds against prevailing interest rates and stock market movements. It does not “promise double-your-money.”

Majority of the fund managers of mutual funds have electronic platforms that allow daily monitoring of the performance of the funds.

Of the total 47 mutual funds, there are nine equity funds, 12 balanced funds (three are foreign currency denominated), 21 bond funds (11 are foreign currency denominated), and five classified as money market funds.

The leading fund manager of the country’s mutual funds are BPI Investment Management Inc. (BIMI), PhilEquity Management Inc., Philam Asset Management Inc. (Pami), FMIC Asset Management Inc. (Fami), Sun Life Asset Management Corp. (Slamc), and Grepalife Asset Management Corp. (GAMC).