Mutual fund industry seen to recover in H2

The mutual fund industry suffered heavily, as a result of the panic caused by heavy withdrawals or redemptions from unit investment trust funds (UITFs).

But industry players are confident of a swift recovery in the second half of the year.

From a high of P84.4 billion in April this year, the mutual fund portfolio dropped to P57.9 billion in June. The figure for the same period last year was P69 billion.

Efren Cruz, chairman of the Investment Companies Association of the Philippines (ICAP), however said the worst is over.

"We are back on track. We are back to where we were before the UITF issue," Cruz said. "The second semester will definitely be better than the first six months of the year."

Fund managers said there was an increase in foreign direct investments at the end of the first semester, and more foreign investors are making a bee-line to the Asia Pacific region, including the Philippines.

Domestic investors also realized that interest rates have stabilized both locally and in the international market.

"They have realized that there was panic, and that there were too few investment opportunities for their appetite. They will be back with the fixed income products," Hector de Leon, PhilEquity executive vice president for sales and operations, said.

Fund managers said redemptions reportedly reached two-thirds of the entire UITF accounts. The AUMs managed by the mutual fund managers saw a little less than a third of its funds being reduced.

There are 11 asset management companies (AMCs) overseeing 34 mutual funds. This is the largest number of AMCs and mutual funds so far seen by the country’s capital markets.

A mutual fund is an investment company whose objective is to make money by investing and reinvesting in securities and other instruments. An investor can participate in the investment company or mutual fund by buying the shares of the fund, thus becoming shareholders.

The fund is managed by an AMC composed of full-time investment professionals.

There are five basic types of mutual funds which are bond funds, equity or stock funds, index funds, money market funds, and balanced funds.