Mutual fund assets reach P58B despite controversy over UITFs

The assets under management (AUMs) of the country’s mutual fund industry in October reached approximately P58 billion, data from the Investment Companies Association of the Philippines (ICAP) show.

The report said the size of the net assets is proof that the negative effect of the controversy over the unit investment trust fund (UITF) is now "a thing of the past."

"We have practically recovered from the bad effects of the controversial UITF,"said Hector C. de Leon, PhilEquity Management executive vice president. UITFs are managed by the trust department of the banks.

The growth of the mutual funds is also evidence that the small investor’s appetite remains hungry for more opportunities outside the traditional bank savings accounts and time deposits.

"There are indeed many ways to invest in today’s market, and the mutual funds are definitely growing in popularity. Mutual funds have been prevalent in European, North American and even some Asian countries," added Sun Life Financial president and chief executive officer Lorenzo V. Tan.

The bulk of the investments were placed in peso-denominated and dollar-denominated bond funds amounting to over P45 billion. The rest of the investments are located in the equities (securities), balanced (mix of equities and bond funds), and money market funds.

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 asset management company (AMC) which is run by full-time investment professionals.

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

A mutual fund is one of the profitable savings instruments for small investors. Funds receive as low as P2,000 (in the case of the GSIS Kinabukasan Fund) or the standard initial amount of between P5,000 to P10,000.

There are 11 fund managers handling 38 mutual funds. The leading fund managers are the Bank of the Philippine Islands-Asset Management Group (BPI-AMG), Sun Life Asset Management Co. Inc. (SLAMC), the mutual fund subsidiary of Sun Life Financial - Philippines, the Philamlife Asset Management Inc. (Pami), PhilEquity Management Inc., Grepalife Asset Management Corp. (GAMC), First Metro Asset Management Inc. and The Mutual Fund Management Co. of the Philippines Inc., the investment management company owned by ATR KimEng Capital Partners Inc.

However, the size of the Philippine mutual fund market remains miniscule compared to its Asian neighbors.

In 2003 alone, the country’s AUMs stood at roughly $800 million. In comparison, Indonesia managed assets worth $8.2 billion, Thailand has $11.8 billion, and Malaysia, $18 billion. Taiwan was managing $76 billion, Hong Kong with $255 billion, and Japan, $349 billion.