The Securities and Exchange Commission has approved the First Metro group’s offering of the very first exchange-traded fund (ETF) in the Philippines—one that will track the main local stock barometer, the Philippine Stock Exchange index (PSEi).
Based on documents from the SEC, First Metro Philippine Equity Exchange Traded Fund Inc. (FMETF) was allowed to register and offer to the public its entire authorized capital stock of P3 billion consisting of 30 million common shares at a par value of P100 each.
The new ETF was allowed to issue its own securities, engage in the business of investing, re-investing and trading in, and issuing and redeeming its shares of stock in exchange for a basket of securities representing an index.
Like mutual funds, ETF pools funds from the investing public by selling shares. But unlike mutual funds, the price of an ETF is quoted real time so investors immediately know how much they are buying or selling their ETF shares for. ETF investors may buy or sell shares through trading participants.
First Metro’s PSEi-tracking ETF aims to “provide returns that would reflect the performance of the Philippine equities market by investing in a basket of securities included in the Philippine Stock Exchange index or PSEi.
The fund will at all times invest 80 percent of its assets in the highest 15 to 20 weighted securities of the underlying PSEi. The remainder may be invested in liquid investments, including cash, cash equivalents, money market instruments and shares of money market funds advised by First Metro Asset Management Inc. (FAMI).
FAMI will be the fund manager and principal distributor, while the custodian bank is HSBC. IGC Securities and First Metro Securities Brokerage Corp. are authorized participants which will participate in the creation and redemption of the fund. First Metro is also the appointed market maker, or the entity tasked to ensure two-way quotes, liquidity and the fair and orderly trading of ETF shares.
The stock exchange has entered into an index provider agreement with FMETF to allow the latter to track the PSEi.