3rd Asian bond fund mulled

Countries in the Asian region are eyeing the possibility of creating a third regional bond fund, this time to mobilize private funds for investments within the region.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said it would be natural for the Asian Bond Fund (ABF) 2 to eventually grow into a concept that would mobilize private sector participation and directing that towards regional development.

During the 39th annual meeting of the Asian Development Bank (ADB) in India, Tetangco said there were talks of expanding regional economic integration beginning with ensuring that there are regional mechanisms for investments.

"There was a general agreement that private sector participation should be harnessed because these are funds that would otherwise go outside the region," he said. "If we want to promote mutual investments, the concept of an ABF 3 along these lines would be a good first step," he said.

If it pushes through, Tetangco said the ABF 3 should be used to mobilize private funds for investment.

The BSP itself recently created the ABF Philippines Bond Index Fund, one of nine bond funds under the Asian Bond Fund 2 initiative that would allow Asian investors into the Philippine bond market.

The fund was approved by the Monetary Board and monetary officials said it carried special features that would eventually be incorporated with existing guidelines on unit investment trust funds (UITFs).

The BSP said yesterday that it has approved the trust deed constituting the bond index fund, a UITF that would invest in peso-denominated bonds issued by the government and quasi-government institutions.

The first Asian Bond Fund worth $1 billion was invested exclusively in US dollar-denominated bonds issued by sovereign and quasi-sovereign issuers in eight markets.

Unlike the first ABF, ABF 2 was intended mainly to pool investments and put them in domestic currency-denominated bonds issued by the sovereigns. The BSP itself has already shelled out $100 million for the ABF1 and another $100 million for ABF 2.

"If ever, the ABF 3 would be funded by private investments," Tetangco said.