AUM of trust entities up 18% to P4.8 trillion in H1

MANILA, Philippines — Assets under management (AUM) of trust entities grew by 18.4 percent to P4.8 trillion in the first half, accounting for a fourth of the resources of the country’s banking industry, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno told members of the Trust Officers Association of the Philippine (TOAP) during a virtual summit that the trust industry has rebounded after experiencing a temporary slump due to the pandemic.

“After seeing a temporary reduction in the early days of the pandemic, trust assets have rebounded, and have now significantly surpassed pre-pandemic levels,” Diokno said.

The BSP chief pointed out the net income of trust institutions surged by 33.5 percent to P3.9 billion  in the first half  due to the related increase in fees and commissions.

He said the overall asset mix has been largely unchanged, with funds primarily invested in debt securities, followed by equities and deposits in banks.

The regulator observed a significant increase in investments in corporate debt and equity securities, which rose year-on-year by 18.8 percent and 39 percent, respectively.

“This is viewed as part of the effort of trust entities to obtain higher yields amid a low interest rate environment. Still, trust assets are highly liquid, with 90.3 percent classified as investments in highly marketable securities and deposits in banks,” Diokno said.

At the forefront of the trust industry’s growth, he explained, is the continued surge in participation in unit investment trust funds (UITFs), in terms of both volume and number of participants.

Data showed UITF assets went up by 34.1 percent P1.3 trillion as the number of participants more than doubled to almost 1.6 million.

“The substantial growth in UITFs is a welcome development. The liquidity of UITFs also makes them an appealing investment outlet during these times. The increased online accessibility of UITFs via various digital platforms has certainly contributed to their growth, and we anticipate a continued push in this regard,” Diokno said.

The regulator continues to encourage trust entities to actively consider environmental, social, and governance (ESG) standards in their management of risks and allocation of capital.

Diokno underscored the importance of differentiated investment strategies for funds classified as sustainable.

“At the minimum, there must be sufficient evaluation of the issuers’ sustainability-related commitments and the sustainable impact of their products,” he said.

The BSP is advocating the wider adoption of sustainable finance, which incorporates ESG standards to assess the value, performance and long-term growth of an asset.

Diokno said the country’s banking system remains strong as total assets rose to P19.9 trillion as of end-August, while deposits are also on an upward trend at P15.5 trillion.

“This encourages us to look toward financial intermediation by supervised entities for support for our recovering economy,” he said.