From peso to dollar equity: Up your investment game this 2018

MANILA, Philippines — You might be interested in the local stock market for the simple reason that you want diversification. Well, here’s information that will make you think twice: the Philippine Stock Exchange only represents about 1 percent of the global stock market. 

It’s time to level up your equity investment game this 2018 by accessing other stock markets worldwide. The question is, how and where do you begin?

Metrobank’s top-performing Unit Investment Trust Fund, the Metro World Equity Feeder Fund, is the answer. In 2017, this UITF recorded a year-on-year return of 27.86 percent, topping all funds in its category and even beating the local Philippine Stock Exchange Index, which registered a 25.11 percent return for the same period.

What is UITF?

In an interview with Philstar.com, Metrobank Senior Vice President Leandro Antonio Santillan gave the lowdown on the Metro World Equity Feeder Fund (MWEFF).

The MWEFF is a UITF  that is classified as a Feeder Fund.  As a UITF, it is a collective investment scheme. As a Feeder Fund, it is further invested or “feeds” into another collective investment scheme, known as a Target Fund. “In the case of Metro World Equity Feeder Fund, the target fund is Investec Global Strategic Equity Fund, which is managed by Investec Asset Management. The target fund started in April 1994 and now has an asset base of over $1.7 billion,” Santillan said.

In deciding the target fund, Metrobank undertook a rigorous selection process that compared investment philosophies, fund performance, track record and other metrics of various global equity funds. 

It chose Investec Global Strategic because it is an actively managed fund anchored on strategy, earnings, value and technicalities. These four factors for stock picking translate to quality and value, making it attractive to companies, Santillan said.

Why diversify?

Generally, the natural progression for investing would start from fixed-income to equities and peso to dollars. For the investor who is already in the local stock market, the next level is the global stock market arena — US, Eurozone, Japan and China.

“With major central banks starting to hike rates, there should be a gradual shift from fixed income or bonds to equities, eventually benefiting equity performance. Furthermore, with interest rates so low, equities seems to be an asset class that can actually beat inflation over time for longer term investors,” Santillan said. 

With the MWEFF, subscribers also get exposure to markets other than the US because the companies within the target fund are virtually from major stock markets around the world. 

“The goal of diversification is to invest in uncorrelated asset classes. If you are heavily invested in pesos, the easiest way to achieve this is to invest in dollar assets. And this will be Metrobank’s advocacy moving forward — to present dollar investment options in the global equity space,” Santillan advised.

Who should invest?

While the Metro World Equity Feeder Fund is a great option for those who want exposure to global equity markets, it is important to determine first if their risk appetite truly qualifies them for such an investment.

“We need to make sure that the investor is knowledgeable of global equity markets and is aware of the risks involved when investing in equities, and tolerant of the volatilities attendant to such type of assets.. The client’s risk profile has to be aggressive,” Santillan said. 

The Metrobank executive also noted that those who are saving for the long-term should consider investing in this Fund.

“These types of funds are really meant for the excess savings of clients that will not be used  for liquidity in the next year or so. This is because we recommend aninvestment horizon of at least five years,” he said. “But having said that, there will be periods of one year when you will get extreme growth, like this year, for equities in general.”

Santillan is also encouraging the younger generation to invest in Metro World Equity Feeder Fund since the study of global equity markets and investment funds is made available in many finance-related curriculums.  It is a good avenue to grow their savings, he noted. 

Is it expensive?

With an investment of at least$2,000 and $1,000 increments thereafter, Santillan believes that the Metro World Equity Feeder Fund is structured to be affordable. 

“From a diversification and asset allocation point of view, this is really affordable. Imagine, for just $2,000, you are exposed to the remaining 99 percent of the world stock market. You get to invest in a $1.7billion fund with hundreds of names of top companies globally,” the Metrobank vice president said. 

And while savings rate in the Philippines remain to be one of the lowest in Asia and the world, Santillan is calling on Filipinos to start investing for their future. 

“Think about retirement and how to prepare for it. Whether that’s five years down the road or much longer, you need to diversify for maximum results. If you remain in fixed-income or Time Deposits alone, Inflation will drown your assets and render these worthless. You need to consider equities and global equities if you must. The Metro World Equity Feeder Fund will move you towards that direction," Santillan said.