Phl mutual funds hit record P227.7 B in Nov

MANILA, Philippines - The country’s mutual fund industry is poised to set another record in 2014, as its assets under management (AUM) as of end November 2014 already reached new highs.

At the start of December last year, AUMs amounted to a record P227.7 billion, or 10 percent higher than the previous year high of P207 billion in 2013.

Philippine Investment Funds Association (PIFA) chairman Valerie N. Pama said the Philippine mutual fund industry breached the P200-billion mark in 2013. The industry also increased its investor base to more than 240,000 while average AUM size also grew to nearly a million pesos per account.

“As of November, year-to-date gross sales were above P64 billion, however volume of redemptions was higher, which resulted to the industry’s negative net sales,” Pama pointed out.

Nevertheless, the industry’s net assets posted growth of six percent in November on a year-on-year basis and this is also due to market appreciation.

Pama explained that the Philippines received upgrades again last year from two ratings agencies.

“Hopefully more investments – not only by foreign funds in the stock market but in actual projects – resulting in progress in a more timely basis.  Hopefully we are learning to manage these projects better and faster,” the PIFA chairperson added, obviously referring to public under-spending on infrastructure programs and snail-paced approvals of Public-Private Partnership (PPP) projects.

“The fall in oil prices would lower inflation and further drive our consumption led growth. Bring the market to higher and sustainable heights. We’ve already seen the break of 7,500-level (of the Philippine Stock Exchange Index or PSEi),” she added.

According to PIFA data, total net asset value of all peso-denominated bond funds amounted to P80.9 billion lower than the equity-related funds reached P86.2 billion as of November last year.

Just less than a decade ago, bond funds accounted for 80 percent of total AUMs.

At the start of 2014, bond funds took up 50 percent of the industry’s AUM and it slipped further to just 42 percent end November.

Stock or equity funds share increased to 38 percent from 32 percent in the same period.  Balanced funds (a mix investment in equity and bond markets) increased from 17 percent to 19 percent.

The shift in investment preference reflects that pathetic state of the bond market where interest rates have fallen to the vicinity of three percent from highs of over 20 percent.

“Bond fund returns have tapered the past years.  When we were young, people used to say that you can live on the interest (mainly from fixed income of bond market) of your retirement money.  But now, investors including retirees have also been thinking of taking a little bit more risk in order to earn more from their investments. There was also the prospect of interest rate hikes, which turned out to be not as high as expected,” Pama explained.

Meanwhile, financial literacy programs of the various asset management companies, banks, insurance firms, and even media, have contributed to the increase in alternative investment instruments.

Pama said that their accounts or clients are getting younger, or a reflection of the country’s positive demographic profile where the productive age group of 24 to 46 are increasing in number.

“They can also be more aggressive and invest in the equity funds since time on their side,” she added.

She added: “The public used to think that investing is only for the rich – but now they are more aware that they can start investing in mutual funds with just P5,000 and continue adding with just P1,000.”

PIFA is the trade organization of the country young mutual fund industry. There are 49 member mutual funds as of November.

However, only a dozen asset management companies (AMCs) oversee the mutual funds.