BPI to launch trust fund tracking local stock index

MANILA, Philippines—Bank of the Philippine Islands is set to roll out this week a new unit investment trust fund (UITF) that will track the main-share Philippine Stock Exchange index, riding on strong investor appetite for equities.

In an interview with the Inquirer, BPI senior vice president and head of asset management and trust group Maria Theresa Marcial-Javier said the group has secured approvals from the board and the Bangko Sentral ng Pilipinas to create the new fund, which will be called BPI Philippine equity index fund.

“It will be for a minimum of P10,000 and using this, investors can also do cost averaging,” Javier said. Cost averaging refers to the strategy of buying a specific product at regular intervals over a long period of time regardless of price fluctuations, with the goal of minimizing risk.

Under the ALFM family of mutual funds, BPI is already managing a PSEi-indexed mutual fund.

A UITF, like a mutual fund, pools investors into a professionally managed fund but the participation is through units instead of shares. Mutual funds are also incorporated as a separate entity unlike a UITF, which is a bank product.

Managed funds target people or institutions who have no time or expertise to actively manage their own portfolios. These funds invest in a basket of products in order to give investors the benefit of diversification.

Asked whether the new product would eat into the market targeted by the PSEi-based mutual fund, Javier said BPI’s plan was to offer it to different markets.

“The initial plan was to offer the mutual funds to the retail market and the Philippine equity index fund to institutional investors but right now, we’re still in the process of applying shares (for the mutual fund), so we are going to have to offer it (UITF) to individuals for now. But later on we will split the market,” Javier said.

BPI asset management is upbeat on the local stock market, which is now trading at all-time highs.

“For the local equities market, although valuations appear stretched with the PSEi trading at 21.26x PER (price-to-earnings ratio) based on 2013 earnings, we expect the market’s performance to improve as analysts upgrade bank profits on account of stronger-than-expected trading gains,” a BPI research said.

For the local fixed income market, the BPI research said the upside could be limited as valuations were seen ripe for profit-taking. With inflation averaging 3.2 percent for the first quarter, local government securities up to the 10-year tenor were already yielding negative real returns. It noted that rates were already at historic lows, with the 10-year government securities trading at 2.83 percent as compared to the 6.67-percent average for the past 10 years.

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