U.I.T.F. MARKET RECOVERING AFTER JUNE-JULY’S P30-BILLION DEBACLE
By Ma. Stella F. Arnaldo
Special to BusinessMirror
THE Unit Investment Trust Fund (UITF) Council will push for the adoption of global standards to help quantify and give an objective performance of its funds.
This developed as Rafael G. Ayuste Jr., deputy group head of Metrobank’s Trust Banking Group, said investors have returned to the UITFs and the funds have recovered from the panic withdrawals of June and July. Of the P300 billion invested industry-wide then, banking sources estimated withdrawals of some P30 billion. Metrobank alone, he told BusinessMirror, lost about two-thirds of the P90 billion invested by clients in UITFs from panic withdrawals. At present, its UITF investments are placed at P150 billion.
Ayuste was among the big number of Filipino fund managers who attended the presentation on the Global Investment Performance Standards (GIPS) at the 6th Annual Pacific Regional Investment Conference of the Asia Pacific Association for Fiduciary Studies (Apafs). About half of the attendees are state pension fund officials, fund managers, trust officers in local banks and members of the Philippine Stock Exchange.
David Balangue, president of the Financial Executives of the Philippines, was pleased with the local turnout, especially at the GIPS presentations, making him “confident that we can push GIPS among local institutions.”
According to Louis Boulanger, member of the GIPS executive committee of the Chartered Financial Analysts Institute, GIPS is a “voluntary set of ethical principles on how firms measure the performance of its funds…” As it captures a fund’s historical data, and standardizes measures on how funds perform, it allows investors to make a good decision on whether or not to invest in a particular fund.
To be GIPS-compliant, Ayuste said the UITF Council “will draw up a blueprint, and work with the CFA Institute.” The CFA oversees the compliance of GIPS around the world. Its institute particularly offers a course program that trains professionals in measuring investment performance using GIPS standards.
Boulanger said, “While it is a complex exercise and could be expensive for a company to undertake, I don’t know of a single firm that was not pleased to have become GIPS-compliant.” The process becomes expensive, he said, because “potentially it could mean the overhaul of the entire financial system of a firm.” He said fund managers will have less difficulty selling products in the international market if they comply with these global set of standards. “It gives them a competitive edge over other fund managers,” he explained.
While these standards have been in existence since 1999, only fund managers in the United States and Europe, as well as Australia, have been using them. He said even in Asia, not even the local players in Hong Kong and Singapore are GIPS-compliant, although regional fund managers based there are. At least 26 countries have already adopted GIPS principles, most of them developed economies.
“By the end of 2006, we expect GIPS to be a truly global standard,” Boulanger said.
As for the UITFs, Ayuste said funds have recovered “better than the previous high . . . equity funds are fantastic. Even fixed income funds are doing quite well. Investors are coming back, though not in droves, but the funds are still an alternative investment [compared with] time deposit . . . How much [interest] will you get? Negative.”
He said the panic withdrawals were basically due to a “miscommunication.” While many investors knew the risks of placing their monies in the UITFs, they also panicked “when their friends started texting them.”
Ayuste stressed that investors in UITFs should look at their performance on a horizon of one to five years. “Based on our past performance of two years, our high today will just be a middle and go further up . . . . If the investors [before June] stayed, they would have recouped their losses and already made some gains today.”
For 2007, he said, the outlook is “fantastic. We are confident about the economy, that’s why we recommend equity funds. Fantastic growth of 37 percent [if you had placed funds in the middle of the year].” Last year, he said, the equity fund index grew about 34 percent.
He predicted that the fixed-income funds, those invested primarily in government securities, will still give “a decent return, higher than the time deposit.”
The 6th Annual Pacific Regional Investment Conference is copresented by the Financial Executives of the Philippines and CFA Philippines.
Business Mirror
November 10, 2006
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