This post kicks off a MoneySmarts series on mutual funds. As I promised in a previous post, I will help investors pound on the doors of mutual fund companies and get answers on issues we all need to understand to make informed decisions about our investments.
So I interviewed PhilEquity Management Inc. president Edmundo Marco P. Bunyi. I asked some of you to be a part of the interview by soliciting your questions. Take a look at how the interview went, and, as usual, you are welcome to share your views and comments.
Bunyi: I read your blog and the comments about PhilEquity and I am pleased that more people are interested in investing and investing wisely. Let me just share with you candidly what PhilEquity is all about. The story of PhilEquity is all about its fund manager, Wilson Sy. You know Wilson Sy – he was former chairman of the Philippine Stock Exchange, a totally low-profile guy, a very good listener, and exceptionally talented. Are you familiar with the mosaic theory? He has a way of putting things together -- information that are public, non-public and non-material -- in a way that can make money in the market. He was a phenomenal market player and soon colleagues, friends and associates asked him to invest for them too. Eventually, he decided to set up a fund and personally managed it – that was in 1994. That was how PhilEquity began.
Wilson is a great trader but not an organization person. (MoneySmarts’ sources confirmed this.) Michael Jordan knew how to shoot the ball but to ask him to handle organizational matters will take time away from what he does best. So for the last years, PhilEquity had no sales force, no marketing people – it only grew via word of mouth. Wilson did it for the joy of trading, with three or four people under him.
Sometime last year, some of his close associates prodded him to do sales. The investment market was growing. I joined PhilEquity officially in December last year to set up an organization that will handle the business side of PhilEquity without diminishing the trading prowess of Wilson Sy.
The plans are to start doing sales and marketing. We are going to provide better services, train more staff to handle walk-in clients, set up a mini call center to talk to customers and investors. We will improve our website. When I saw it, I was ashamed to own it! We know that our market is Internet savvy so we will use the Internet not just as a channel but also a medium for information that will fortify and cement our relationship with our clients.
We are like a 13-year-old start-up. All the changes we are planning will happen. The impact will most likely be felt late this year or next year. With our past performance being what it is, I can say that it will only get better.
We want our investors to go through a comprehensive risk profiling. We uphold the standards set by the AIMR. We want our investors to fully consider their investment constraints, return objectives, investment horizon, appetite for risk, and liquidity. We want them to be clear about other considerations like are they okay with investing in tobacco companies? But to go through this they either have to get professional investment advisor or get this kind of service from a private banker. We cannot do that for our clients one on one or else we will have to charge more.
Studies show that over the long run, wealth is created due to asset allocation more than anything else. This means how you divide the investment pie will determine your success. We also know that returns are correlated with the risks that you take. Once you have decided how to allocate your assets, you will then decide whether to invest on your own or get a professional manager to do it for you. Here is where PhilEquity can help.
There are two kinds of risk: idiosyncratic and systemic risk. When you watch out for systemic risk, you consider inflation, deficit, GNP, and all that – things that affect the entire market. Idiosyncratic or non-systemic risk has to do with your exposure to particular companies. As a fund manager, we help you with the non-systemic risks that you face.
The skill of a fund manager is to generate alpha. There is a formula that says r=α+ß+χ, where χ is the return of the stock, ß is the correlation of the stock with the market and α is the excess return. Alpha is that little extra that is determined by how you time the market, how you allocate your assets over several industries, what stocks you choose. Wilson Sy is very good about generating that alpha.
MoneySmarts: If you want to make sure that your investors get into this knowing all the risks he is taking, then why does your prospectus reveal very little information about your fund?
Bunyi: We are in the process of improving our prospectus. We have performed well over an extended period of time. Our success is driven by our methods so it’s all there – it’s just a matter of enunciating it. We will include a proper description of the risks we take in managing the fund. (Editor’s note: The prospectus in PhilEquity’s website is not a complete version). I was able to compute in December that the volatility of our fund is in fact lower than that of the Philippine stock exchange index. We will make that information available very soon in our website. Another good measurement of risk is sharpe ratio, and we might include that as well.
MoneySmarts: Perhaps you might want to include that as the criteria of the awards in ICAP next year?
Bunyi: Yes, we can suggest that to the board of ICAP. It will be a good idea to measure performance through both returns and volatility. And the figures show that PhilEquity beat the market on both counts.
MoneySmarts: What is the size of PhilEquity now?
Bunyi: We have around P3 billion assets under management right now.
MoneySmarts: And what investment strategy does Mr. Wilson Sy use? Is he using a top-down approach or is he value-oriented, for example?
Bunyi: Let us not be deceived by that “top-down, bottoms-up approach”. What does that really mean? Top down means you look at how the economy is doing, then from there choose the industries that are doing well, and then the companies that you think will make money in that kind of economy. A bottoms-up approach means you look for specific companies that offer you a fair value. You look at their net asset value, maybe use a discounted cash flow method. If you read macro, does that mean you ignore valuations in the market that are compellingly cheap? If you look at particular companies, does that mean you disregard how the economy is doing?
Definitely, both these investment strategies are present in our decision making, they are inputs to Wilson Sy and parts of the mosaic that he studies.
MoneySmarts: Does he make all the decisions by himself?
Bunyi: He is aided by two researchers, but yes, he is the portfolio manager for our equity fund. He also looks at the technicals as well as the fundamentals. He looks at companies that are undervalued, he looks at the sentiment of the market. He times the market well. He has access to information about flows, supplies and demands for particular securities.
MoneySmarts: There is no investment committee that serves as an oversight?
Bunyi: That is the direction that we are going. We are going to make the process more formal, document the process more diligently, put in place risk management controls. We are not allowed to invest more than 10 percent of our portfolio in a particular stock, and that’s a built-in risk management tool. There are more sophisticated ways, but the overall sense is that we don’t want risk that will affect our entire portfolio.
MoneySmarts: Will this include formal guidelines on when to invest in a certain company and when to exit a certain position?
Bunyi: Yes, that will be part of that. There are two levels to that and it should include a management action trigger where you have to explain why you hold on to a certain position.
MoneySmarts: How will this benefit the company in terms of sustainability? I mean, it will be hard to clone Wilson Sy.
Bunyi: Wilson is still young at 54. He has many trading years to go. But we will have a transition to a more formal process. Wilson will still be in the investment committee and he will have several fund managers under him. He will be there for a long period of time.
MoneySmarts: So why should I invest in PhilEquity? Sell to me.
Bunyi: Two things: performance and better risk management. I told you that I have seen the standard deviation computation for our equity fund. We were less volatile than the market and provided more returns. It’s not an empty boast. You are in the market to make money. We can make you happy because we have the track record of great performance and lower volatility than the overall market. We generate the alpha for you and outperform the market.
MoneySmarts: How concentrated is your portfolio? How many positions are there in all?
Bunyi: We have around 60 stocks in our portfolio as of May 8. Our top positions are: PLDT (9.4 percent), BPI (7.8 percent), Ayala Land (7.1 percent), Ayala Corp., (5.3 percent), Megaworld (4.6 percent), Meralco B (4.4 percent), SM (3.8 percent), Metrobank (3.2 percent), SMPH (3.1 percent) and Globe (2.8 percent).
MoneySmarts: The Philippine stock market is very small compared with other markets. I suspect most of the other funds have the same top picks. Is this true for your fund? Then how do you provide more value?
Bunyi: Yes, you are right. We also follow industry limits and liquidity requirements. Then we have the risk controls we talked about and the investment strategies we mentioned. Aside from that, we have confidence in Wilson Sy’s stock picking abilities. He is not a rookie; he doesn’t panic when there is volatility in the market. To me the greatest traders are those that have lost money in the past and have lived to tell the tale, who have experience in managing a fund during a bear market and has seen the best and worst of it.
MoneySmarts: What is the total cost to the investor? Why do you charge both front-end and back-end fees. Isn’t this a case of double dipping?
Bunyi:We charge a 3.5 percent sales load (this is the part that goes to the agent as commission) depending on the amount of the investment. We charge a 1.5 percent management fee and an exit fee of 2.0 percent if the investment is withdrawn in less than one year, 1.5 percent if withdrawn in less than two years but more than one year, and one percent if withdrawn in less than one two years. (Sorry for the error. If the investment is kept within the fund for more than two years, there is no exit fee. Doubled checked this with their prospectus to be sure.) As long as we disclose our fees, I don’t think there should be any problem. The operative word here should be transparency. Nobody is forcing you to invest if you think the fees are steep.
MoneySmarts: Other funds charge a performance fee. Do you have that too?
Bunyi:No, we don’t but I think that would be nice incentive to fund managers to do well.
MoneySmarts: But isn’t it true that an investor chooses you because you have promised to outperform the market? Why should he pay a fee for something that you have promised to deliver from the very beginning?
Bunyi:Let’s put it this way. If I was your employer, I wouldn’t mind paying you a fat bonus if you beat the high-water mark. This is exactly the same thing. What is important is that the fee has to be transparent.
MoneySmarts: What is the principal driver of PhilEquity’s decade-long performance? It seems like you were insulated from what has happened in the global equity markets for the last 10 years. The returns look too good to be true.
We were affected by the ups and downs in the global equities markets. There were two or three years of negative returns. (Please see historical returns).
**Bunyi joined PEMI in October 2006. Prior to PEMI, he was senior vice-president and corporate treasurer of International Exchange Bank, chairman of iCurrencies, Inc., and head of FCDU and FX Distribution in United Coconut Planters Bank. The bank credited him for the profitable operations of iBank’s treasury department. Bunyi will be in charge of Philequity’s Money Market Fund and Dollar Income Fund due to his expertise in fixed income trading. Concurrently, Ed has been appointed as President and COO of listed firm iVantage Corporation, an affiliate of Philequity Management, Inc.
PhilEquity Fact Box
MoneySmarts: What is the principal driver of PhilEquity’s decade-long performance? It seems like you were insulated from what has happened in the global equity markets for the last 10 years. The returns look too good to be true.
We were affected by the ups and downs in the global equities markets. There were two or three years of negative returns. (Please see historical returns).
**Bunyi joined PEMI in October 2006. Prior to PEMI, he was senior vice-president and corporate treasurer of International Exchange Bank, chairman of iCurrencies, Inc., and head of FCDU and FX Distribution in United Coconut Planters Bank. The bank credited him for the profitable operations of iBank’s treasury department. Bunyi will be in charge of Philequity’s Money Market Fund and Dollar Income Fund due to his expertise in fixed income trading. Concurrently, Ed has been appointed as President and COO of listed firm iVantage Corporation, an affiliate of Philequity Management, Inc.
PhilEquity Fact Box
great job, truly helpful! there is some risks though as to the sustainability of the fund. they rely on one investment manager (IM). i've audited several funds base in cayman islands and most funds has two or three IM. the fees though are little compared to other funds. most funds charge 20-25% performance fees and 1-5% management fees.
I'm working abroad and I've been tracking PhilEquity's performance for a long time now. I like the way the fund is being handled and been trying to invest especially in their Stocks Fund but found accessibility a major problem although I haven't spoken to one of their representatives yet. I come home to the Phils. for only 2 weeks every quarter and am always busy during that time. I want to find out if there are other financial institutions promoting their funds especially in the Alabang/Las Pinas Area that I can easily access when I'm home. I was able to invest to three other mutual funds using only one financial company and I want to see to it that I could invest in PhilEquity when I get home by mid 3rd qtr of this year. Could you please help me on this?
I especially did not invest in Stocks Fund in other Mutual Funds because I want it to be in PhilEquity.
dear readers, lest someone misinterpret my posts, i would like to remind you that this does not mean i am recommending PhilEquity :-). I am getting answers to questions so that you can make informed investment decisions. I am interviewing presidents or directors of each mutual fund company and post the Q&As in this blog to make you feel like you actually talked to them. I hope that will level the playing field for the common investor who does not have privileged access to information. As you know, that is how the economy works in the Philippines, and for me as a journalist, that is the face of the enemy :p.
let's make everyone millionaires many times over! woohooo :)
Val A., the best way i could think of is to forward your comment to the president of philequity (doing that soon after i post this comment). you may also want to look at the PhilEquity factbox in my post as all the telephone numbers and salient information about the fund are there. Hope this helps!
ryan, i agree and as you can see in my questions, that was one of the weaknesses i could see in the fund. Warren Buffett himself is making sure that Berkshire Hathaway continues to do well if something happens to him. The company has to face this possibility, because much as we would all like to live forever in the prime of our lives, that just doesn't happen. Bunyi did say, however, that they are going in that direction. There will be more fund managers, although Wilson Sy will still be on top of the overall decisions. That's the plan anyway. We shall see in the next year or so what happens, i guess..:)
i subscribed to philequity recently. the 1.5%management fee was not subtracted upon entry.....when is this charged? how often?
i invested a little in philequity in may last year for me and for my daughter. at that time, NAV was about 7.++ as of may 18, NAV was 13.3593! ang galing talaga!
philequity surely knows where to put the money. if i were left to invest on my own, it would've been a disaster...
I've been with Philequity for several years now and is happy with their performance even with their comparatively steep fees. Their website sucks, though. An updated content would surely help increase investor confidence.
The PHISIX Fund Corp. which mimics the PSEi has gained 45.01% as of 18 May 2007 (Friday) in its one year of performance. In the same period, PHILEQUITY has poorly performed below this benchmark with only 38.04%. A mutual fund's objective is to surpass the performance of the index it tracks down. PHILEQUITY failed its mandate! Save & Learn Equity Fund gained 46.36% beating the index. Sunlife Equity has gained 43.25%. Philam Growth Fund has gained 43.02%. PHILEQUITY clearly had an embarassing performance. It would have been better for their investors to have invested directly at the PHISIX Fund, that's without a fund manager and therefore has lower fees yet achieving higher gains. So why should someone invest here ?
Another even more important question: Can we know the inception price of the PHILEQUITY Fund (13 YEARS ago) so that we will know how far the fund has performed ?
Caveat emptor!
first of all, thanks to salve for being the conduit through which investors reach the people behind phil mutual funds.
secondly, thanks to mr. bunyi for responding to these queries about philequity.
now, please allow my comments. i will comment in parts because this will be l e n g t h y.
part 1: on mr. sy's investment strategies.
according to mr. bunyi, mr. sy is an investment mosaic theorist. this is a dangerous claim that raises more questions and RED FLAGS rather than shed light on how philequity is managed.
dangerous because for mr. sy to consistently perform well as a practicing mosaic theorist, he must have access to reliable "NON-PUBLIC, NON-MATERIAL INFORMATION."
pardon me, but the last time i checked trading on non-public, non-material information is INSIDER TRADING.
market timing is a natural by-product of mosaic theorists. for how else can a manager maximize profit on non public information?
should anyone then invest in a fund where there's a possibility that it's success is partly because of INSIDER TRADING and MARKET TIMING? uh, not me.
combining this mosaic theorist claim and mr. bunyi's non-chalant degradation of active investment strategies as mere minor inputs to "mosaic theory" leads me to this conclusion: that mr. sy and philequity does NOT really have an investment strategy in place.
rather, mr. bunyi made a failed attempt at making philequity's investment strategies legit and intelligent-sounding (read: more smoke and mirrors) by claiming MOSAIC THEORY as the key to the fund's success.
why would anyone jeopardize a manager's credibility and a fund's success by claiming publicly that it may have engaged in insider trading and blatant market timing?
why would anyone call attention to a manager's possible illegal trades? (hello SEC are you reading this?)
what happens when this component of mr. sy's "mosaic" is not available, or simply becomes unreliable?
how much of philequity's success has been because of insider information?
One thing is clear: claiming mosaic theory only put mr. sy's analytical skills in doubt bec he has to rely on inside information to perform at the same level as other managers who don't have access to insider information.
if mr. bunyi retracts and then subsequently claims mr sy does not use non-public non-material information then this whole claim of mosaic theory crumbles.
if mr. bunyi retracts, then the credibility of all of his responses would be cast in doubt.
finally, we circle back to WHAT IS REALLY PHILEQUITY'S INVESTMENT STRATEGY?
who knows. what's evident after this initial discussion is that its certainly not any of the well-defined and most commonly used active investment strategies.
oda.
Hi albert, historical NAV at www.icap.com.ph may reveal better information on their performance. Philequity vs PSEi performance from my own records: Year 2006, 52% vs 42%. For 2007 year to date, 17% vs 16%. From my 1st investment with them last Nov 1998, 4.7-fold vs 1.9-fold.
Based on the past 17 months index fund seems a bad idea relative to Philequity. Over 8.5 years it's an HORRIBLE idea! My P 300k with them last Nov 98 is now worth P 1.42M (106,590 shares). With an index fund I'll only have P 570k less fees. Something to ponder about... :)
IMHO, I don't think indexing is a good investment strategy for the philippine market, because our economy has never followed a stable upward path, disturbed periodically by coups and political instability. It took the philippine index almost a decade to climb back up to its all-time high of 3400++. If you invested in the index at the peak of the 1997 market, you would have broken even just now ( or last May 18 when it climbed to a new ten-year high ). The value of the index is not even adjusted for inflation. And the composition of the index is revised every quarter or so.
part 2. on philequity's double-dipping on fees.
FACT: philequity double-dips, i.e. CHARGES INVESTORS THE SAME FEE TWICE.
notice how mr. bunyi evaded the question and instead put up a brick wall to anyone who questions philequity's fee structure: TAKE OUR FEES OR LEAVE!!!
no explanation.
no marketing spin even.
just a brick wall.
isnt this a contradiction: a transparent brick wall? LOL.
phil mutual fund investors, i submit to you mr. bunyi's definition of "transparency", his operative word: philequity will charge you at the time you invest, and we will charge you when you exit within 2 yrs (isnt this 3 more on this later). why? well, that's just the way it is.
transparent? NOT.
for the benefit of those not familiar with fees, mutual funds in north america either charges a front end fee or a back end fee but NOT BOTH.
oda
p.s. @salve, i think there's a typo in mr. bunyi's orig response: "an exit fee of 2.0 percent if the investment is withdrawn in less than one year, 1.5 percent if withdrawn in less than two years but more than one year, and one percent if withdrawn in less than one year."
exit fee of 2% if less than one yr and then at the end its 1% for one yr again?
hi Oda, thank you for your comments.
(for all readers) on PhilEquity's exit fees:
Sorry, for the error. Corrected it already. Just to clarify. If an investor withdraws his investment in less than a year, he is charged a 2% exit fee, if he keeps his money there for more than a year but withdraws before his second year, 1.5%. He isn't charged if his money is kept in there for more than 2 years.
So far, most Philippine mutual fund companies I am doing research on have both sales loads AND exit fees :-(. Hmm. They say this is to encourage Filipinos to invest for the long-term. I can understand that, because as a people our penchant for time deposit is too strong for my taste. BUT, its refreshing to see your perspective coming from an industry that's much more advanced than ours because it shows me where the industry should be going. I hope pretty soon the competition in the mutual fund industry will grow and more funds will stop charging both front-end and back-end fees.
On mosaic theory, I read up on it before I posted Mr. Bunyi's response. I learned from a Forbes Media company, Investopedia.com, that the AIMR (Association for Investment Management and Research) has recognized mosaic theory as a valid method of analysis, although some still see it as a misuse of insider information. Is it right that the industry is still split on this?
For those who are interested to read further on it, I suggest you start with Investopedia (http://www.investopedia.com/terms/m/mosaictheory.asp) and the CFA Institute website itself. Here is the link that leads to a letter from the AIMR to the US SEC on selective disclosure and insider trading: http://www.cfainstitute.org/centre/issues/comment/2000/00disclosure.html. This link may also be helpful: https://www.cfainstitute.org/centre/ethics/ros/pdf/BestPracticeGuidelinesfinal.pdf). This is what I have so far. I'm still reading up on it. Please feel free to add more references that might help us.
@Val A.
I currently invest in Philequity by remitting the amount to the fund's bank account. Then I send copies of the remittance receipt and investment application form via snail mail (They require this unfortunately). Same documents are also sent via email to one of their representatives to notify them of the investment.
If you have more questions you could contact their representative, Janice Fernando(jung.fernando@philequity.net). She has been a lot of help lately.
Btw, I agree their website really sucks. It is not updated as frequently as it should esp. contact information. Don't rely on their info@philequity email. (I've had a bad experience on this).
Hello all,
I think the post and comments above has presented some problems with the Phil mutual fund industry.
I studied several offering docs of phil mutual funds and sadly, they are not as transparent as those of the US n European markets am used to. for me, a funny thing to note: some funds have 70+ yrs old IMs and directors. No offense but in the real FS industry, I fear these people would be non-performing assets, just earning fees from my investment w/o doing much.
-some real old prospectuses needs serious updating - especially on contact details, service providers, and info about management
-the fund infrastrusture is still not competitive - no independent administrators and share registrars.
-Service providers are mostly related parties - I consider this bad, bad for investors who will be the milking cow for a single consolidated entity. Most funds have related inhouse custodian, broker, administrator, share register, several in-house directors.
-fees aren't very transparent; fee calculations and basis not disclosed or not clearly discussed
-and seriously, the sales load fees are double charges - as investors are already paying management fees. This is most uncommon in US/Euro funds.
-no indication of frequency of receiving regular NAV statements - audited and unaudited.
-most funds require personal appearance in order to invest. In the US/Euro funds, an investor can contact a fund's share registrar and sends thru the subscription documents thru e-mail or fax provided for in the prospectus, w/ originals to follow by post. then, it's the fund's responsibility under AML laws to do due diligence on new investors. No appearance required. Not much hassle to the investor.
I hope that our funds industry will improve as it grows.
Have a great day evryone!
Oda, insider trading is more common than we imagined.
The funny thing is that so many people have access to non-public info that you lose the advantage of inside trading. It's already discounted by the market. In 1994-95, I was trading oil exploration stocks and rubbing elbows with company geologists. I never made a fortune. Everybody seem to know what I knew.
@pinoy investor:
if everybody knew what you knew that's not inside information.
oda
Oda, isn't insider trading, trading based on non-public but MATERIAL (i.e. will affect the price of the stock) information? In your post you equated insider trading with trading on non-public, NON-material information. Maybe this was just a typo on your part?
Anyway, I felt it would be instructive to post the definition of the so-called Mosaic Theory as discussed in the CFA Standards of Practice Handbook:
"Mosaic Theory. A financial analyst gathers and interprets large quantities of
information from many sources. The analyst may use significant conclusions
derived from the analysis of public and nonmaterial nonpublic information as
the basis for investment recommendations and decisions even if those conclusions would have been material inside information had they been communicated directly to the analyst by a company. Under the “mosaic theory,” financial analysts are free to act on this collection, or mosaic, of information without risking violation."
I think this is pretty much the spirit of what Mr. Bunyi was trying to say. An analyst gathers a lot of information. Some of them may be PUBLIC and MATERIAL such as an earnings announcement by a company or revisions to the earnings outlook released by the company to the press, or information in a company's annual report, etc. Some of them may be NON-PUBLIC and yet NON-MATERIAL. In other words, information that, on its own, would not affect the value of the stock.
The talented analyst then connects the dots and by piecing together all this information may arrive at an insightful investment decision about the stock which the general investing public would not have arrived at. The mosaic theory states that these analysts cannot be accused of Insider Trading simply for piecing together information which on their own may not have been significant.
I was a bit appalled at how easily a charge as serious as Insider Trading could be levelled on someone on the basis of an on-line interview. I think it would be a good idea to first understand fully what the interviewee was saying before jumping to conclusions. Intuitively, it would not make sense for a president of a fund management company to admit to insider trading. If that was the impression created, then I feel the appropriate response would be to probe further and clarify rather than accuse especially in a forum such as this where not all readers are familiar with such things.
Oda, I hope you're right. In oil exploration, the stock will hit the roof if you find oil. Before public disclosure, the first people to know there's oil are the geologists. Believe me, rumor spreads faster than public disclosure. So I guess everybody knows it and I'm not insider trading. Good for me!
Well said Merton, nowadays its so easy to accuse anyone of wrongdoings through biased comments.
@oda: isnt this a contradiction: a transparent brick wall? LOL
more of an oxymoron really. :D
i was supposed to point out last week that that line there doesn't sound well for a fund which "has plans to do sales and marketing" but what can i do? i've been to busy with stuff that the time i had then was just to skim over the post.
Merton is right. Oda, as a reader and newbie on Mutual Funds, I will have an impression (based on your violent reaction) that Philequity is good for nothing mutual fund. Maybe you can do away with hasty conclusions, and you can also avoid emotional posting. Salve, I suggest that you can interview Sunlife next as I'm interested with their products, (I think Sunlife has a couple of awards on the mutual fund awards, although philequity dominated the awards) And I do hope we can solicit the comments of Oda since I think she's an expert in the Mutual Fund industry, especially in north america.
PBF--
Philequity didnt actually dominate the awards with 5 coz Philam Asset Mgt Inc (PAMI) had 14 and Sunlife had 6 (but of course they represented more mutual funds.)
Salve--
Pls refer to the graph "Philequity Funds vs Phisix" above. I think it is not correct to say that "one peso invested in Philequity Funds in 1994 is now worth P9.44". If you include 3.5% entry fee & 1.5% mgt fee per year, your peso in 1994 would actually be worth only P7.60, and not 9.44. It is better to say that one share was only P1.00 in 1994, and P9,44 now (rather, in 2006, as per graph). That's better to say, although it may still mislead the investing public coz one share in 1994 won't still be one share in 2006, or 2007, or in the future. Remember, the # of shares you purchase will continuously decrease as long as the 1.5% annual mgt fees are charged.
Hi angie
may i assume that you referring to the time value of Php 1 being not the same as that of Php 1 in 2006? because one share (representing your equity) of philequity or any other fund in 1994 would still be one share in 2006 and beyond, what would most probably change is its valuation (net asset value per share)
annual management fees are already imputed in the computation of navps so investors can expect to gain on a net basis the actual performance reported by mutual fund managers, that is of course after deducting the initial sales charge/entry fee
thanks
AngieV,
Thanks for the clarification. Now I know that PAMI is the real winner in that awards. Well, I'm happy bec may balanced fund in PAMI is one of the winner in the balanced fund category =) I'm glad more RFPs are here in the forum that can help us out with our questions. I myself is an economist and I can say my forte is on Macroeconomy, so investment is rather tricky for me =) Salve, i will be looking forward for more featured Mutual Funds soon =)
angie,
If 1 peso in 1994 is worth 7.60 today in the best performing mutual fund, that's 17% cagr. Not very impressive. Interest rates were much higher in 1990s. You could get 15% cagr in long-term time deposit. So 2% spread is all you get for the risk of unguaranteed return in mutual fund. Not a very good deal.
hi pinoy investor, great insight. although the CAGR of 17% is not accurate because as jeff has pointed out, fees are already imputed in the NAV. :)
Oh hi Jeff! Tnx! Yes, ur right, thats how it is for PAMI & the others, that the annual mgt fee is already included in the computatn of NAVPS, as part of the fund's expenses & OH costs. But I got a different understanding from Salve's interview w/ Mr. Bunye when he said they charge a 3.5% sales load, a 1.5% mgt fee, & a 2% exit fee if... I assumed it was similar to how we charge our 2% annual mgt fee with our Variable Life investment funds, which is paid by redeeming units(shares) from the investor's account. Hence, the investor's # of shares decreases through the years, with valuation going up & down depending on the market. Pls do verify for us how it is w/ Philequity. Thanks a lot!
PS--
Ay sori, Bunyi pala, not Bunye, hehe
quoting AngieV:
I assumed it was similar to how we charge our 2% annual mgt fee with our Variable Life investment funds, which is paid by redeeming units(shares) from the investor’s account
Aha! So this is probably the key why my computations for my Sunlife VUL is off by a few fractions from the one I see via the online inquiry. This is quite confusing as the NAVPU would now not be sufficient to determine the value of my investment. AngieV do you know why this was the method chosen for VULs?
salve,
i used to own philequity shares which i sold a few years back. if i remember correctly, your no. of shares remain the same but you're charged one-time 3.5% entry fee and 2% exit fee. annual management fee is included in the NAV. so 9.44 will give you a net of 8.90. that's 18.3% cagr. 3.3% spread vs. time deposit. not so good. in my opinion, the risk premium should be at least 10%.
Hi guys,
I am new in mutual funds investment, actually very new because I just invested to PhilEquity yesterday. I made the decision after reading the inputs in this blogsite and some mutual fund sites. I understand that there are cost involve but I pray that in long term this will be paid-off. Every investment entails cost( i guess =) )
I work abroad and I plan to add investment on a regular basis but I have some questions in mind.
1. When is the best time to add?
2. Is it advantage to add on a monthly basis?
This site is very helpful, thanks!!!
pinoy investor :
is there a time deposit that returns 15%?
pinoy investor:
But that's already history, the risk has been taken, and the people who invested in Philequity did get that 3.3% extra gain. So I think that was a pretty good deal. It's not like someone knew 13yrs ago that 18.3%pa is the max they'll earn.
Flash forward today where interest rates are in the low single digits, it still makes a lot of sense to go for MFs.
i read somewhere that during marcos era the jobo bills have 40% interest per annum?! can somebody confirm this?
Hi, Im back fr my trip abroad so all my comments will pile up today :)
1.5% management fee is imputed when computing daily NAV and not charged to your # shares - my own shares havent shrunk all these years! So P 1.036 per share (gross of 3.5% fee) in 1994 is worth a full P 13.4812 last Friday - 21.4% per annum compounded for 13.25 yrs. Annual reports say former BSP Gov Gabriel Singson got his 1.6M shares at one peso each, now that's lucky! :D Comments on Philequity's good track record are well-founded, in fairness. NAV is net of management fees but still gross of entry / exit fees.
I'll just poke on Philequity more for services rendered for the 3.5% entry fee. Hey their website improved so kulitin na natin! we wanna see the ff on their website: (1) portfolio mix and commentary every month, (2) annual reports, (3) NAV on time by 17:00, otherwise: (4) can they make the 3.5% fee more reasonable for investments above, say, P 300k?
If there's anyone I'll poke for underperformance, it'll be BPI UITF, they seem too bagets in the funds game, their local and intl bond and equity funds have lagged their benchmarks and peers by a wide margin, and I believe they figured prominently in that May 2006 RP bond price-fixing incident. Their vieux-riche clientele don't notice it, but the nouveau-riche do!
For the next funds Q&A I'll nominate Banco de Oro UITF. To my surprise BDO balanced funds have done quite at par with Philequity (18.6% vs 19.1% YTD), their $ funds are above-average, best of all they deliver it for zero fees and in all their branches, they're ideal for the do-it-yourself moneysmart investor. www.bdo.com.ph
And CONGRATULATIONS to everyone profiting from the PSE's rise to its new all-time high - 3,505! Hope there's more to come :D
mindmarc,
I'll try to explain risk in simple terms. Suppose I ask you to choose between 2 games with same bet and prize - one peso bet wins a million pesos. Game 1 is toss coin. Game 2 is lottery. What would you choose?
Suppose you chose lottery and won. Does it mean lottery has better odds than toss coin?
Suppose I ask you let's play again. Would you still chose lottery?
There's no risk in hindsight. There's always a risk in foresight. We make our bets in foresight not in hindsight. You can't place a bet after the winning number has been announced.
@hachiko, i just checked the philequity website and it has improved a lot. i noticed that they now have a fund factsheet which shows the portfolio holdings, return info, etc. the annual reports for all funds are now also posted there... what an improvement from their ugly site before!
The website had a makeover. The timely and informative content will help a lot in building confidence particularly to new investors. I can now just refer people to their website for answers to most of their questions.
It would be better if Philequity add in a little more CRM and find the time to answer 'relevant' inquiries posted there. Or maybe setup a forum.
All in all, a great effort by Philequity group. I take back my earlier comment.
melvin,
There was 15% time deposit in 1990s. Now, you can't get this from commercial banks. You could get it from small banks on limited basis but you have to negotiate with the president or the owner. (I have several >15%)
pinoy investor:
But if I did choose lottery (for some reason) and won then that's a pretty darn good decision in hindsight wouldn't you say? 1M is still 1M whether it's been gained by careful analysis or just pure dumb luck. Because that's what you're doing w/ the Philequity data, looking at it in hindsight. (I'm not a Philequity employee nor investor btw.)
But of course, while choosing a game again for the 2nd round, picking lottery looks crazy. But relating it back to MFs it's like the rules have changed. Bank interest rates have plummeted. It's like the winnings for toss coin have been reduced from 1M to 1K.
hi mindmarc!
i'll get back to u later. wud still need to verify if the same method is true for all Variable contracts in RP. tnx!
mindmarc:
If I make 18% in stock market, that doesn't tell you risk is low. If prices fluctuate plus or minus 40%, that tells you risk is high. Actual return is not a measure of risk. Price volatility is the measure of risk.
You look at price data to understand risk and invest when the odds are favorable. Of course you can also win by dumb luck.
A 3% risk premium is okay if prices fluctate plus or minus 3% a year. In reality, prices can drop 8% in one day.
Risk premium depends on your available investment opportunities. It might make sense to you but not to me. So don't take my word for it.
hi salve, would you please feature Sunlife next? am currently studying my agent's proposals and i want to decide soon. thanks!!
hachiko,
Don't compare UITF to MF, they are 2 different types of instruments as you'll be comparing apples to oranges. MF is more liquid that you could trade easily.
All,
Number of MF shares should increase over time if the funds have dividends/interest reinvested over a period of time. However, the value/price per share could go up/down depending on the intrinsic values of the underlying instruments it owns. However, I don't know if there is a cutoff time where the order to buy/sell the MF shares at which the day's price will be applicable to the order.
hey! i heard na philequity daw has a new website. true ba??
i visited their website kasi yesterday. to check lang the NAV if bumaba. tapos i saw a some sort of teaser na sa sept. 17 daw magkakaroon na sila ng bagong website?
tapos kanina, iba nanaman lumabas. wala na 'yung malaking magnifying glass. :D hihi!
why is the website for the latest performance of philequity is not available? always offline
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The website had a makeover. The timely and informative content will help a lot in building confidence particularly to new investors. I can now just refer people to their website for answers to most of their questions.
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