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					The Philippines' Mutual Fund Industry

by:     Fernando Jose Sison III
        President, Investment Company Association of the Philippines (ICAP)

The mutual fund industry in the Philippines registered new highs during the year 2002 as total
assets more than doubled to Philippine Pesos (PhP) 25.96 Billion (equivalent to US$ 487.3 Mn.)
as of Dec. 31, 2002 compared to PhP 11.58 Billion (equivalent to US$ 224.1 Mn.) as of the
previous year, representing a triple-digit growth rate of 124%. These mutual funds, numbering
twenty-two (22), are members of the Investment Company Association of the Philippines (ICAP)
which was organized in 1995 for the purposes of increasing public awareness in the Philippines
about mutual funds as an investment alternative; helping develop further the domestic capital
market; establishing a more efficient and effective vehicle for funds mobilization and utilization;
and upholding the highest levels of ethical conduct among its member funds.

Of the 22 mutual funds in the Philippines, ten (10) are balanced funds, six (6) are bond funds,
four (4) are equity funds; one (1) is an index tracker fund; and one (1) is a money market fund.
As of Dec. 31, 2002, the six bond funds comprised the bulk, or 90.9%, of the Philippine mutual
fund industry, an indication of the investing public's conservative nature and preference for steady
returns. On the other hand, the ten balanced funds comprised a much smaller 4.5% of the
industry while the equity funds comprised a similar 4.5%. The weak appetite of Philippine
investors for equity funds or balanced funds, for that matter, is partly explained by the
performance of the Philippine Stock Exchange Composite Index (or "PHISIX"). The PHISIX
declined from 1,168.08 points as of Dec. 28, 2001 to 1,018.41 points as of Dec. 27, 2002, or by
12.8%, due largely to the global economic slowdown and the worldwide stock market slump.

During the first half of 2003, the Philippine mutual fund industry's total assets reached
unprecedented heights of PhP 34.13 Billion (equivalent to US$ 638.4 Million) as of June 30,
2003, representing a commendable growth rate of 31.5% from year-end 2002. Again, the bond
funds were the market's favorite, further increasing their dominance of the industry to 92.6% from
90.9% as of year-end 2002. The balanced funds' share decreased slightly to 4.2%, while the
equity funds' and index fund's combined share dropped to 3.2%.

The prospects for the Philippine mutual fund industry remain bright, especially with the current
rebound in both the domestic and global capital markets. A pending bill in the Philippine
congress, the Revised Investment Company Act, or "RICA," augers well for the industry. RICA
has been thoroughly deliberated upon and is an amendment and improvement of the decades-old
Investment Company Act of 1960. Aside from ensuring a fair, orderly and efficient capital market,
the RICA seeks to protect investors and provide the private and public sectors access to funds
that are vital to the development of the country’s economy. The bill seeks to ascertain that
mutual funds will continue to play a vital role in the Philippines’ economic growth and
development in the foreseeable future.

Note: end-of-period exchange rates of Philippine Pesos to US$1.00 are:

        Dec. 28, 2001 PhP 51.683
        Dec. 27, 2002 PhP 53.275
        June 30, 2003 PhP 53.463

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