Mutual funds are sold as the investment for the masses, allowing ordinary Filipinos with as little as P5,000 to get their feet wet in an instantly diversified portfolio of stocks, bonds, or both.
It was a little bit of a surprise to find out that the average mutual fund investor as of June 30, 2008 has a placement of roughly P483,820 in mutual funds — not your average Filipino, obviously. That’s an impressive little factoid.
Based on official figures from the Investment Company Association of the Philippines (ICAP), this figure is lower than the average investment size of P580,843 in December 2007, which is again lower than P622,079 in June 30, 2007.
Interviews with the chief executive officers of BPI Investment Management Inc., Philam Asset Management Inc., and Sunlife Financial, which account for more than 90.0 percent of the industry, show that assets under management are declining mostly because of the market downturn and not due to massive redemptions. Sure, there some investors took their money out, but in my article last Monday, “Investors calmer in face of investment storm,” mutual fund practitioners said investors were indeed less jittery and this was a welcome surprise to them in the face of the current market downturn.
That’s because for the past six months, markets have gone haywire and mutual funds in the Philippines bled. If you look at the ranked year-to-date returns below, United Fund’s negative 10.0 percent return, while the smallest loss among the roster of stock funds, makes you wonder what it did to protect its portfolio from the depressed financial markets both here and abroad. (For some reason, United Fund does not act like a stock fund because it does not go up when the stock market grows and doesn’t also go down when the markets are down.)
Fernando Jose Sison III, the ICAP chairman this year and one of the pioneers of the mutual fund industry, said that in BPI alone, the average mutual fund investment is around P1 million. Same with Sunlife.
“We can conclude that such investors have already amassed sizeable funds that they are setting aside for a rainy day and are already knowledgeable about the stock market, bond market, and the capital markets in general,” Sison said.
I reiterated to him an idea broached in this blog first by Oda last year for the industry to report performance not just by listing down yields. For next year’s annual awards, perhaps the ICAP could measure volatility, for example. The reason that’s important to investors is that while we understand the nature of the beast –-mutual funds give potentially higher returns but expose you to higher risks too –- and that it’s best treated as a long term investment, you wouldn’t want to be caught in a severe downswing on the year you need your funds. So you would like some measurement of how volatile a fund can be.
At first, Sison was skeptical. He thought mutual fund investors would not appreciate such a figure because mutual funds already seem too complicated to ordinary investors. But he emailed and said he changed his mind, because of the average investment size of mutual fund investors.
“It is in this light that I agree with your thinking that some sort of performance benchmark, other than a straightforward rate-of-return computation, would be useful and relevant to mutual fund investors,” Sison said.
“This other performance benchmark could be a volatility indicator, as what you mentioned, or a reward-to-risk ratio, as what my employer organization (BPI) currently measures and monitors. Such additional performance benchmark, taken in relation to yield performance, will certainly add depth to an investor’s analysis of his medium-term (3 years) or long-term (5 years and above) investment options. We observe that once an investor has opened a mutual fund account, he tends to keep it, add to it, and diversify into other types of mutual funds, thus, a medium- to long-term outlook is more of the general mindset of such investors,” he added.
I certainly hope we will be seeing those figures in the papers, and in the ICAP awards next year. Meanwhile, see below how mutual funds have fared in the last six months. These are all year-to-date returns as of July 29, 2008, ranked in terms of yields.
Stock Funds
(Primarily invested in Peso securities)
United Fund, Inc. -10.45%
First Metro Save and Learn Equity Fund, Inc. -18.04%
ATR KimEng Equity Opportunity Fund, Inc. -23.33%
Sun Life Prosperity Phil. Equity Fund, Inc. -23.57%
Philequity Fund, Inc. -24.61%
Philequity PSE Index Fund Inc. -24.99%
Philam Strategic Growth Fund, Inc. -25.89%
Philippine Stock Index Fund Corp. -30.24%
Balanced Funds
(Primarily invested in Peso securities)
First Metro Save and Learn Balanced Fund Inc. 1.01%
First Galleon Family Fund, Inc. 0.31%
Optima Balanced Fund, Inc. -16.24%
Sun Life Prosperity Balanced Fund, Inc. -16.94%
MFCP Kabuhayan Fund, Inc. -17.18%
GSIS Mutual Fund, Inc. -22.17%
Philam Fund, Inc. -23.03%
(Primarily invested in foreign currency securities)
Sun Life Prosperity Dollar Advantage Fund, Inc. -2.25%
Bond Funds
(Primarily invested in Peso securities)
Cocolife Fixed Income Fund, Inc. 2.23%
ALFM Peso Bond Fund, Inc. 1.66%
Ekklesia Mutual Fund Inc. 0.34%
First Metro Save and Learn Fixed Income Fund, Inc. -0.05%
Philam Managed Income Fund 0.94%
Sun Life Prosperity Bond Fund, Inc. -0.98%
Legacy GS Fund, Inc. -0.98%
Philam Bond Fund, Inc. -2.6%
Sun Life Prosperity GS Fund, Inc. -4.56%
Prudentialife Fixed Income Fund Inc. -5.27%
(Primarily invested in foreign currency securities)
ALFM Dollar Bond Fund, Inc. 1.81%
AIG Global Bond Fund Phils.,Inc. 1.64%
Grepalife Fixed Income Fund Corp. 1.07%
Grepalife Dollar Bond Fund Corp. 0.92%
Philequity Dollar Income Fund Inc. 0.56%
ALFM Euro Bond Fund, Inc. 0.31%
Philam Dollar Bond Fund, Inc. 0.07%
MAA Privilege Dollar Fixed Income Fund, Inc. -1.34%
Sun Life Prosperity Dollar Abundance Fund, Inc. -2.31%
MAA Privilege Euro Fixed Income Fund, Inc. -4.45%
Money Market Funds
(Primarily invested in Peso securities)
Sun Life Prosperity Money Market Fund, Inc. 1.21%
Philequity Money Market Fund Inc. -0.36%
Legacy TD Fund, Inc. -0.97%
ATR KimEng Money Market Fund, Inc. -5.96%
December 22nd, 2008 at 6:17 pm
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December 22nd, 2008 at 6:04 pm
guys! you got a wonderful topics!
Lets me help you, if you’re still aspiring to invest in a terrific mutual funds company. Balanced funds still the best, let me explain it to you! Call me or txt me…0909 8840808
August 30th, 2008 at 7:48 am
dear sir,
i just want to inquir how to start mutual fond,and which to contact or address ,emails.pls. give me some details. im a OFW HERE IN SAUDI ARABIA.im looking forward to your advice and response.many thanks.
August 8th, 2008 at 4:10 pm
Mutual Funds and Unit Investment Trust Funds are also a main topic at my blog. Sunlife is I think one of the best as they were the only company that allows investors to transfer from one fund to another for up to 4 times for free on an annual basis.
August 1st, 2008 at 10:07 am
Good to see that there is a blog about the capital markets in the Philippines. Sadly, however, the extremely restrictive regulations really do a diservice on the industry, which likely is the reason it remains a market for only the well healed.
Unfortunate as well that the market is closed to foreign competition and/or foreign offerings, so the country biase couldn’t be more lopsided (i.e. you could only own a portfolio of Philippine equities of fix inc. instruments). How could you even come up with a benchmark with such a small market with very few players.
It’s almost impossible to really have good insight/research to even get a decent sense of volatility. The Philippines is poised well and within easy reach of of more sofisticated and open markets (China, HK, Singapore, Taiwan, Korea) not to mention major world power players (the SWFs - Temasek, GIC, CIC, etc.).
You guys should really lobby hard to open up the markets so you can benefit from it and grow it to a mature enough state to develope better products that are more suited for the masses.
By the way, watch out for I.O.U.S.A. (indi film making its rounds here in US) it’s a must see..it will put things in perspective for you guys and give you a sense of where to park your mula.
God Bless and Good Luck to you all!
August 1st, 2008 at 6:29 am
There are some MFs that offers you the opportunity not to pay any sales load by holding on to the investment for a required amount of time. Research is very important.
Since the Phisix is down now, this means that the stocks are undervalued so this maybe a good time to buy at you are getting them at a discounted price.
I know many lost money from their MFs investment but I believe they lost because they invested near the peak of a bullish run in the market. Once it reached its peak, there’s no other place to go but down. As they say, the market works in cycles.
Also, none of these people really lost any money unless they redeem their shares. It’s only loss on paper.
July 31st, 2008 at 4:57 pm
actually, an investor will incur more losses due to the sales load.
do you think its more beneficial to invest in UITF given the MF’s exorbitant fees?
July 31st, 2008 at 11:30 am
@Oda, sorry about the confusion. That would seven-month returns, not six-months. The figures from ICAP, however, in the article I wrote last Monday, are for the first six months.
>>can you remind me again if these reported figures are net of all fees (MER, commissions)?
yes, they are net of all fees.
cheers. and thanks on the tips on the money market funds!
July 31st, 2008 at 11:27 am
hi jeff! the figures were given to me by ICAP, so I still have to confirm with them how exactly they computed it. As for Sunlife and BPI, they both said that their average investor has around P1 million in their funds. I don’t have the figures for Philam, which I suspect is lower.
Regarding your P80k to P100k computation, I still think that’s still not the average Filipino investor I was expecting.
July 31st, 2008 at 10:35 am
hi salve,
if the data is from july 07, wouldnt it be the year-on-year (YOY) performance?
July 31st, 2008 at 3:33 am
Philippine Stock Index Fund Corp. -30.24%
now even a layman can understand that our country’s economy is really slumping! except of course our economist president! whoa what an irony!
you also had that article that if you save 30 pesos a day, that will sum to about 10K in a year which would be enough for someone to join a mutual fund. now if you see this returns from ICAP, then you will wonder if its a sound investment decision.
what i can say is use the money to invest on yourself. use the money to learn as much as you can, train for some skills and use these skills set to have an advantage over others in the employment world.
July 30th, 2008 at 9:22 pm
yay : )
salve, i wanted to clarify. you said performance in the last six months and then you said YTD returns?
YTD would be seven months (to the end of July).
in any case, according to bloomberg, the PSEi from 12/28/07 to 07/29/08 had a total return of -28.5%.
from 12/28/07 to 06/30/08 it was -30.4%.
whichever the figure, and looking strictly at return data, YTD performance for the equity funds you listed were pretty good, with only one fund underperforming the index.
can you remind me again if these reported figures are net of all fees (MER, commissions)?
you may also want to dig into how and why those money market funds negative returns (bec. they’re not supposed to lol)
July 30th, 2008 at 9:15 pm
Hi Salve,
May i just comment on this as a former insider in the mutual fund industry
“It was a little bit of a surprise to find out that the average mutual fund investor as of June 30, 2008 has a placement of roughly P483,820 in mutual funds — not your average Filipino, obviously. That’s an impressive little factoid.”
I would assume this figure was derived by dividing total assets under management by the number of shareholders? if it is, then it is the “average” value or in the context of a mathematician the “mean” value, using the mean might not give us an accurate picture of the average investment size of a typical investor because it is very sensitive to extreme values
let me try to explain this by analogy:
10 people are on a bus
mean income = Php 10,000
median income = Php 10,000
i got off the bus, Lucio Tan gets on
mean income = Php 50 Million
median income = Php 10,000
a more accurate measure of average account size would be to determine the median which is derived by laying all values in a straight line, the value in the dead center is the median
based on my numbers before, the average account size (the median) should be just around php 80K to 110K, but of course, this is old data, and it may not apply to fund houses with large initial investment requirement
thanks,