BSP okays $200-M mutual fund for investment in RP

The Bangko Sentral ng Pilipinas (BSP) has approved a proposed $200-million mutual fund that would mobilize funds from Filipino residents abroad for investment in Philippine equities and debt papers.

The proposed mutual fund was being pushed by ING Bank which sought clearance from the Monetary Board (MB) for the use of the overseas banking units (OBUs) of Philippine banks as conduit for the mutual fund shares.

BSP Deputy Governor Ernesto Espenilla told reporters yesterday that the scheme was approved in principle by the MB, clearing the way for ING to finalize the packaging of the instrument.

Espenilla said the product would be a Filipino mutual fund to be established abroad, initially Ireland, where it would be marketed to Filipino residents in that country.

"The mutual fund would enable Filipino residents in Ireland to buy shares in the fund and the money would be invested in Philippine businesses, either in equities or bonds," Espenilla explained. "This is the kind of innovation that could mobilize resources from overseas and channel them directly into Philippine investments."

According to Espenilla, ING needed MB approval because the bank was planning to distribute the mutual fund shares through the OBUs of Philippine banks operating abroad, specifically those already catering to large Filipino communities.

"Now that the MB has approved the project in principle, they can start to organize banks with OBUs that they intend to partner with," Espenilla said.

According to Espenilla, the mutual fund was planned to have an initial fund of $200 million and could be expanded depending on market appetite and response.

"They were also initially eyeing Ireland since there is a large Filipino community there," Espenilla said. "The initial push, basically, will be in the European market."

If the response is strong, Espenilla said ING could create another fund for the same purpose.

Espenilla said the mutual fund would follow the relevant regulatory framework applicable in whatever jurisdiction the fund would be sold in, particularly diversification rules and risk management rules.

"The MB decision was just an enabling decision to allow ING to proceed with the specifics of their plan," Espenilla said. "But we are encouraging such innovations since we have been looking for ways to tap these funds."

The BSP has been trying to encourage banks not just to help overseas Filipino workers remit their funds but also to develop products and services that would mobilize part of these funds into investments.