Mutual fund sector’s assets seen to double next year

The Investment Company Association of the Philippines (ICAP) has expressed optimism that the mutual fund industry’s total assets would double next year to almost P50-billion.

As of end September, the industry registered a combined net assets of P23.63-billion, which represents an all-time high for the 12-year-old non-banking financial sectors. This represents a 107-percent increase from the P11.4-billion registered for the full year 2001.

"It is possible that the assets will double next year as there is a noticeable shift by investors to low-yield investment products," said Artemio A. Tanchoco Jr., ICAP chairman.

Tanchoco’s optimism is also anchored on the fact that several new players are entering the industry. In the past three to four years, new players have not only joined the industry, but have also been responsible for increasing its assets.

The new players will likely join the fixed income category of the mutual fund industry with US dollar funds. These include financial giants like the Philippine American Life and General Insurance Co., Sun Life of Canada, and the Ayala Life Assurance Corp.

Tanchoco explained that as long as interest rates remain at present levels, the industry will not just remain attractive but even "grow tremendously."

"With average yields of between seven to nine percent, and no tax on capital gains what else could be more attractive," the ICAP chairman said.

A mutual fund is an investment instrument that allows small investors with a (minimum investment of P5,000) the opportunity to invest in the stock market. The fund, which is managed by a fund manager, pools institutional money with those of small investors.

There are presently 22 mutual fund companies classified as equity or stock funds, balanced funds, bond funds, and money market funds. There are five equity fund firms, 10 balanced funds, six bond funds and a single player in the fledgling money market fund.

By its title, the equity fund invests purely on the equities market while the bond market concentrates on the commercial and government bond market. The balanced fund distributes its pooled money in both markets while the newly-formed money market fund invests in the currency market.

Of the total investments by the country’s mutual fund industry, it’s equity funds accounts for P824.3-million with net assets of P1.28-billion.

The balanced fund has investments worth P969.7-million under net assets of P1.3-billion. Bond funds made investments worth P428.6-million with net assets worth P21.0-billion while no records of assets and investments have been registered by the money market fund.

Filipino Fund, a member of the Ayala Group of companies, is the leader in the equity fund market with net assets of P511.3-billion from an account base of 7,404.

The GSIS Kinabukasan Mutual Fund has net assets of P636.5-million with equity investments worth P588.9-million and an account base of 8,423.

But the most outstanding remains Ayala Life Fixed Income Fund under the bond fund category. A relative newcomer, the Ayala Life Fixed Income Fund has net assets amounting to a whooping P12.5-billion and investments reaching P428.6-million.

The industry has grown by an average double-digit figure in the last five years.