Philippine bond index fund launched

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Posted: 2:23 AM | May 11, 2006

Inquirer

THE Ayalas group' Bank of the Philippine Islands (BPI) launched Wednesday a pioneering P1.4-billion ABF Philippines Bond Index Fund representing the Philippines' share of the $2-billion Asian Bond Fund (ABF) pooled by 11 central banks in East Asia and the Pacific to boost currency bond markets.

BPI Is mandated to manage the Philippine share of the second Asian Bond Fund, or ABF2.

At the launch, BPI executive vice president and head of asset management Adelbert Legasto said the fund could easily double in a year's time, as investments from the public would augment the seed money from the central banks.

He said the allocation for the Philippines could easily increase if the government's credit rating would improve.

Given its current sovereign ratings, the allotment amounts to P1.25 billion, dwarfed by the Bangko Sentral ng Pilipinas' $100-million contribution to the fund. It is expected to increase to P5 billion if the sovereign credit rating rises to investment grade.

The Philippines is currently rated two notches below investment grade by Fitch, three notches below by Standard & Poor's and four notches below by Moody's.

The ABF Philippines Bond Index Fund tracks the iBoxx ABF Philippine Index composed of 74 securities, including Fixed-Rate Treasury Notes and sovereign zero-coupon bonds.

The ABF Philippines Bond Index Fund "is an important piece of market infrastructure that is expected not only to promote trading and liquidity of fixed income securities, but also to improve awareness on index tracker funds," BPI said in a statement.

With a minimum investment of P100,000, the fund allows retail investors to participate in the Philippine bond market at a low cost and enhances the global asset allocation strategies of institutional investors, it said. With INQ7.net