Bankers’ best investment bets in a low-interest-rate regime

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MANILA, Philippines—The Philippines is in a unique spot nowadays, with most macroeconomic indicators showing robust growth and positive sentiment in the business community, translating to better confidence all around.

However, this poses an equally unique situation for people who want to see their investments yield better returns. As the economy improves, domestic interest rates come down with declining risk levels associated with lending. At the same time, the push toward lower interest rates is also being driven by record low interest rates in the United States and Europe, as their central banks keep yields low in the hope of revitalizing their economies.

Where then should Filipino investors place their money to best profit from the financial markets, given these circumstances? The Inquirer’s Doris C. Dumlao and Daxim Lucas asked bankers and investment experts for their opinion on where to invest a hypothetical P150,000 in extra cash, and here’s what they said:

Norman Martin Reyes

SVP and head of marketing group

United Coconut Planters Bank (UCPB)

“Right now time deposits rates are not too attractive.

“If you have P150,000, you might want to look at UCPB’s trust banking products. With as low as P10,000, an investor can consider our various Unit Investment Trust Funds (UITF). Depending on the investor’s risk appetite, we can recommend either the United Equity Fund (UEF) or the United Balance Fund (UBF).

“The UEF is suitable for an aggressive type of investor with a long-term investment horizon. To achieve long-term capital growth, this fund invests in domestic, listed equities. This fund’s absolute year-to-date net yield is 16.79 percent. Our compounded annual growth rate (CAGR) for the last three years is 46.5 percent.

“The UBF is suitable for moderately aggressive type of investors. To achieve a balance between long-term capital appreciation and income growth, this fund invests in a mix of domestic, listed equities and fixed income securities. The absolute year-to-date net yield of this fund is 11.36 percent. Our CAGR for the last three years is 27.2 percent.

“We have two other funds that invest in fixed rate securities, namely the United Conservative Fund (UCF) and the United Cash Management fund (UCMF). These funds are less risky and they offer steady income streams but the returns are not as high as the other funds.

“One word of caution though: the UITF is not a deposit account and not insured by Philippine Deposit Insurance Corp. Any reduction in income or principal due to prevailing market conditions is for the account of the investor. Historical performance, when presented, is purely for reference purposes and is not a guarantee for similar future return.

“We also have other investment outlets. For P50,000, we can offer investors our services to purchase UCPB’s LTNCD from the secondary market, which can earn about 5.75 percent based on the present market rate. UCPB’s long-term negotiable certificates of deposit (LTNCD) pay interest quarterly and have a maturity of three to five years. We can also act as a broker and offer corporate bonds on the secondary market at rates better than the prevailing time deposit rates. Interest payouts depend on each bond offering.”

Pascual Garcia III

President

Philippine Savings Bank

“I would suggest mutual fund weighted to equities. Bond funds won’t do well next year. I think interest rates will move a bit higher so bonds won’t do well. Easing will essentially taper off locally and globally.”

Marvin Fausto

Chief investment officer

Banco de Oro Unibank

 

“Because of the people’s generally busy schedule, I recommend that they choose from the existing UITFs available in the banks, particularly BDO.

“They are professionally managed and offer better returns given the commensurate amount of risk one is willing to take. For the conservative investors, I recommend the Peso Money Market Fund—the fund is very stable and offers better returns compared with the ordinary time deposit.

“For the balanced investors, I recommend the Balance Fund that offers a good mix of investments in fixed income and equities, and for the more aggressive investors, I recommend the Equity Fund so they can participate in the strong long term performance of the Philippine stock market.

“UITFs have, in the past, outperformed comparative investments and are specifically designed to benefit investors over the long term. For P150,000, I believe the UITF is the best investment for you.”

Ma. Theresa Marcial-Javier

Senior VP/head of asset management and trust group

Bank of the Philippine Islands

 

“Invest in the Philippines. Put P50,000 in a growth-oriented peso equity fund that is positioned in cyclical bets that will benefit from the following investment themes—infrastructure spending, consumer spending, banking and credit cycle upturn.

“Put the next P50,000 in a long-duration peso bond fund as interest rates will continue to stay low for a while.

“Put the remaining P50,000 in a short-term fixed-income fund to provide for unforeseen liquidity requirements as well as a stable income source to protect the portfolio from market swings.”

Wick Veloso

Chief executive officer

HSBC

“Select common share equities with a good revenue story or potential significant growth business plan. Otherwise, go for preferred shares instruments (with good dividend paying history) like the SMC Preferred Shares for a good dividend return. Just go either way.

“Deposits, government bonds and other corporate fixed-income instruments offer very unattractive returns compared to the above mentioned investment opportunities.”

Gina Morales

Executive vice president

Philam Asset Management Inc. (PAMI)

“We believe that the Philippine equity market will continue its winning streak for the next three years as the country’s fundamentals are sustainable, with corporate earnings of listed companies expected to grow  as well. With this my recommendation is to invest over the long term in any of PAMI equity-laced funds, namely the Strategic Growth Fund, Philam Fund Inc. and GSIS Mutual Fund Inc., depending on their risk tolerance. These funds are actively managed and have outperformed the index and their peers, and have remained in the top 1 and 2 as compared to other equity funds in the market.

“Also our investment process remains to be our key differentiator versus other fund providers as seen from our consistent track record of performance and having to stay on top of the league tables. We encourage to start investing their hard-earned money in the Philippines given strong long-term growth prospects.

Overall mutual funds are still the investment structure of choice. It  fits every retail investor’s needs of starting with something small and bringing the most benefit of generating maximum returns through diversified portfolio which is actively managed by expert fund managers.

Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • http://twitter.com/efrenddancel Bogs

    I commend the article for timely writing it in the wake if the Aman future scam. My 2 cents worth, for newbie investors, UITF, Mutual Fund, Variable Unit Life are really recommendable. Once you graduate and get the hangout of it, time to dip your heart and money directly investing to Blue chip stocks. Always remember if you want higher return, be ready for higher risk and vice versa.

  • http://pulse.yahoo.com/_47AS3MXEHKUW6IEMD5W3CCDWKQ gary

    Investors should not pay too much attention to what the market is currently doing, where there are adults who behave like schoolchildren. Stocks always outperform any other Investment vehicles on a 10 or 20 year period. In 2008, If an Investor bought JGS at 1.90, AP at 4, MER at 16, URC at 4.50 or any conglomerate for that matter he would be sitting on multi bagger and enjoying dividend payouts of about  33 to 50% of invested capital annually. 
    Time is friend of a wonderful business but a deadly enemy of sub par businesses.

  • http://pulse.yahoo.com/_47AS3MXEHKUW6IEMD5W3CCDWKQ gary

    For rational Investors , a fall in price is a buying opportunity. Stocks actually become safer when it becomes cheaper as it allows an investor to buy more shares for less money. If SM announces a 25 or  50% discount on its malls, we can be sure that people will line up to buy. Long term Investors should be taking the same view and line up to buy shares when it becomes unduly attractive from a value standpoint.

  • cabcog

    In my humble opinion, the equity market, at this time, may not be the best choice to invest on especially for the risk averse.  Since the equity market will soon reach (or may have already) it peak of gains, equity prices are at this time expensive and if someone will invest now in this type of UITF, your chances of getting losses in the near future is imminent.  

    Just imagine, if you invest in equity type UITF now at NAV of 150 which has appreciated for more than 30% over the past year and next year, the NAV dropped by 40% (such will be a nightmare).  Please look at the share price history over the past five years. 

    I believe that the soaring equity prices was a product of rising influx of foreign investments after they shy-away from the markets in the west.  What will happen then if they decide to bring home their funds, i am sure you know the answer. 

    The equity market is very volatile nowadays and investors should be vigilant if they decide to invest in equity.  Also, do look at the portfolio that the fund has invested on and their track record.  Surely, it will be a different market scenario one year earlier, since you could have picked up on some of the market appreciation.

    Just my two cents.          

    • robrano

       Not only volatile but much manipulated.Aside of the cheating funds sold by US bank which became worthless garbage, the bursting bubble of the equiti market with overpushed real estate prices was the main reason for the recent financial crisis. Overpricing and easy bank credits created the ikkusion of permanent rising value. After the bubble burst, the anyway crippled bank system had millions of real estate which the owner could not pay anymore. And now, there are ads for US homes, three at the price of one.
      In RP, real estate, condominium units etc. are sold at prices like at main commercial zones or even higher already. Tere are agencies like in malls which sell mini houses at a mini lot five times more expensive that what we paid for constructing a three times bigger house on an eight times bigger lot just few years ago. And it is offered at 5, 10 and 25 years payment which it makes it up to five times more expensive but who knows about his situation  so  far in the future? Pay 10 years and then become unable to pay further. You will lose your home even you paid already more than the double original price.

  • joboni96

    if only the government sells direct retail government bonds
    to us pilipinos
    not through intsik switik banks

    we will get higher interest for our money and
    government will lower its interest costs
    resulting in a better economy

    intsik switik banks ang nakikinabang sa government bonds
    na ginagamit sa pag control ng ating ekonomiya

    may gana pa amo nilang
    agawin ang eez at kalayaan islands natin

  • 1voxPopuli

    good read for small time investors like me

    • robrano

      Yes, just put your money there and lose it. Only a stupid will invst
      in funds which pay interests and dividends near to zero hen the REAL inflation rate is many times higher.
      And the :robust growth”? Which growth when investments ehrink 80%, also exports, tourism will soon collaps due to the extreme overvalued peso, the same the export. What really is growing are th dollar reserves since OFW families get less and less pesos for their remittances. And te profits of big business which imports cheap and sells expensive, also thanks the peso rate. Not a single good which is imported at the now chap dollar price was lowered in local peso prices. All the blabla about good economy is just for to cover up the big wealth transfer from the poor to the rich and the government.
      Is it growth when the purchase [ower of the peso is now, qith a 41 to the dollar rate, is much lower than when the rate was near to55? And the purchase power is the only interesting matter to customers, not the irrational rate. Make it 35 and the overpopulation will be solved by starving, np more export and tourism jobs and runaway businesses. Only RP is “boosting” economy by making investment unaffordable to foreign investors and by killing exports with the high pushed peso, all other countries rather depreciate their currencies for the same reasons, improving the economy. Why, for example, Germany has a still booming export even there is the everywhere debt crisis? It is because of the now low Euro.
      The prices are “growing” and the OFWs have to send more remittances to their families. And then the BSP sats that the big remittances are pushing the peso against the dollar and the OFW families get less pesos for their remitted dollars. Logical? No, just abig skimming of remittances, election is near.

  • http://pulse.yahoo.com/_47AS3MXEHKUW6IEMD5W3CCDWKQ gary

    Our criteria for buying stocks

    Large economic Moat
    Leading or strong 2nd in the industry it is in.
    Proven Management with Owner like Orientation
    Pays a Dividend
    Available at an attractive price

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