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Philippine firms broaden access to offshore investments

The number of feeder funds denominated in the local currency has surged during the past two years.
Philippine peso in the black wallet on a wooden background

Manila-based BPI Asset Management and Trust, a subsidiary of the Bank of the Philippine Islands (BPI), has become the latest domestic fund manager to launch a feeder fund denominated in Philippine pesos.

The BPI Invest US Equity Index Feeder Fund Peso Class, a unit investment trust fund (UITF), was launched last month, according to a statement from the firm. The product provides US equity exposure to Philippine investors, with the target fund being State Street’s SPDR S&P 500 ETF Trust, according to its fund factsheet.

The feeder fund has already been available to investors since 2014. However, only the US dollar share class was available.

According to the firm, having a peso share class for feeder funds makes it easier for Philippine investors to invest, especially since not all domestic investors hold US dollar accounts.

“Without opening a US dollar account or having to exchange Philippine pesos to US dollars, clients can invest in the US market through this new fund simply through their peso accounts,” the bank said in the statement.

The firm now manages two feeder funds each having a Philippine share class available to investors, the other being the BPI Catholic Values Global Equity Feeder Fund, which invests in the CBIS World Equity Fund.

Separately, another subsidiary of BPI, BPI Investment Management, announced in November that it will be acquiring the mutual funds managed by Philam Asset Management. BPI Investment Management is the bank’s mutual fund company, while BPI AM and Trust is the bank’s trust entity.

In the Philippines, mutual fund products are regulated by different regulators, which results in different terminology.

Banks and their trust departments and stand-alone trusts manage unit investment trust funds (UITFs) and are regulated by the central bank, the Bangko Sentral ng Pilipinas (BSP), while investment companies manage mutual funds and are regulated by the Securities and Exchange Commission (SEC).

Growth of the peso share class

While feeder funds have been available in the Philippines since 2013, the first peso-denominated products were introduced in 2016.

At the time, only two feeder funds denominated in the local currency were available to investors, both managed by ATRAM Trust. The firm decided to launch the peso share classes as it believed its clients would prefer to use the local currency instead of converting them into US dollars. BPI AM and Trust followed in 2017 with its Catholic fund.

It was only until recently when more feeder funds denominated in the local currency were launched.

Between 2018 and 2019, Manulife Asset Management and Trust launched five peso-denominated feeder funds in the country, right after the firm was established in 2017, according to data from the Trust Officers Association of the Philippines (TOAP).

During the same period, ATRAM Trust launched five more feeder funds in the local currency, which include the country’s first technology-focused feeder fund.

The ATRAM Global Technology Feeder Fund, which was launched in 2018, invests in Fidelity’s Global Technology Fund. As of the end of October, the number of investors in the product surged to 268 compared with just 69 at the beginning of the year, according to TOAP data. However, its assets were down to PHP 893.5m ($17.61m) from PHP 1.36bn during the same period.

In total there are now 15 Philippine peso-denominated feeder funds out of the 56 UITF feeder funds, TOAP data shows.

Part of the Mark Allen Group.