Investments 101: Sunlife Mutual Funds

As a pay forward and payback for my subsidized University of the Philippines education in graduate and postgraduate courses, I will have some columns in Finance and Investments to help the financial literacy campaign and hopefully reduce wasteful investments which are a drag on the economy.

We will cover both active investments in business, i.e. where you are actively involved in managing a business, and passive investments i.e. where you are deploying your excess funds in other business and assets that you are not directly managing. Investing in equipment, inventories, receivables, and human resources in your business are active investments. Investing in stocks, bonds, time deposits, REITs, money market instruments, and mutual funds are passive investments.

For this column, we will cover mutual fund investments and in particular the Sunlife Mutual Funds. It just happens to be the biggest mutual fund in the country, have the largest number of fund investors and I attended the stockholders meeting in Makati last week as a shareholder.

I have been a Sunlife Fund investor for more than 11 years and I have advised some clients on this fund. Over this time horizon our effective yield/return on investment is 160%. In fact, we had doubled our money after five years and recovered most of the principal investment so the investment balance are all profits.

If we go back and review the Philippine economy in the last 14 years, we will also see that it had gone through two recession and recovery cycles, that if you timed your passive investments within the 12 months of the down cycle, you would be up in most of your mutual fund and stock market investments. The three elements of passive investments are diversification, risk aversion, and horizon. And these are embedded in Sunlife Mutual Funds.

Mutual funds are professionally managed investment funds that pool money from many investors to purchase listed securities. Due to its size it can afford highly competent investment advisers and analysts, attain a higher level of diversification, enjoy lower operating expenses, and provide liquidity to investors.

Investors are charged the management fees and expenses in running the funds by the fund managers. But if the fund is well-managed and provides continuous earnings, fees and expenses are easily affordable by the investors. This has been the case for the Sunlife Mutual Funds as they have consistently achieved the returns expected by the shareholders.

There are 12 Sunlife Mutual Funds and the most popular are: Philippine Equity Fund, Balanced Fund, Money Market Fund, Bond Fund, Dollar Advantage Fund, Philippine Stock Index Fund, and the GS Fund, These are all open-ended funds, which means you can come in and out of the fund at any time subject to fees.

Choosing any of these funds also depends on your tolerance or risk appetite and how long you can keep your money in the fund. Then, there are minimum sizes for investments in these funds which you have to consider to make the fee affordable. Over the years, I have tracked some of these funds’ performance and in most years they outperformed the Philippine Stock Market Index and other standards which they have to measure against. There were also down years which would be bad years if you had to cash in in those years, but would be okay if you were able to ride over those years.

The Sunlife Stockholders meeting two weeks ago had about a thousand people in attendance. The crowd was clearly in middle to upper class, young prosperous millennials, middle-aged successful business people, and prosperous retirees. Mutual funds fill in an investment avenue for these sectors that is legitimate and relatively safe.