Philequity creates MSCI PH-based fund

MSCI, a leading global provider of indices, analytical tools, data, real estate benchmarks and ESG (environmental, social and governance) research.

Mutual fund management firm Philequity Management has teamed up with leading global index provider MSCI to create a new local fund that mirrors the 23-company MSCI Philippines index, allowing local investors to participate in a basket of companies most attractive to foreign funds.

The MSCI Philippines Index is designed to measure the performance of the large and mid cap segments of the Philippines market. With its 23 constituents, the index covers about 85 percent of the Philippines equity universe .

The new Philequity MSCI Philippines Index Fund will allow investors to participate for as low as P5,000 and increments of P1,000 thereafter.

Miguel Agarao, vice president at Philequity Management, said in a recent investors briefing that this new fund would present an alternative to equity-laced mutual funds that mostly track the main local stock barometer Philippine Stock Exchange index (PSEi).

The MSCI Philippines index follows a different set of criteria, much more stringent criteria than what the PSE uses and it rebalances quarterly according to that criteria,” Agarao said.

“For those who actively trade the market, you would notice that foreign funds account for a large portion of our trading volume. In fact, foreign funds account for at least 50 percent of the trading volume in the Philippine stock market, such that the run-up you saw at the start of the year was driven by foreign passive funds which benchmark against the MSCI,” he said.

As of end-January 2018, the top two components of MSCI Philippines are property giants Ayala Land and SM Prime, with respective weights of 10.43 percent and 10.24 percent.

BDO Unibank, Ayala Corp., SM Investments and JG Summit Holdings are also included with respective weights of 9.63 percent, 8.35 percent, 7.91 percent and 7.02 percent.

Other top components are Aboitiz Equity Ventures (4.85 percent), Universal Robina Corp. (4.55 percent), PLDT (4.34 percent) and Jollibee Foods Corp. (3.95 percent).

The fund will be officially launched as soon as final regulatory approvals are obtained from the Securities and Exchange Commission.

The MSCI Global Investable Indexes (GIMI) methodology was described as a comprehensive and consistent approach to index construction that allows for “meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations.” This methodology aims to provide exhaustive coverage of the relevant investment opportunity set with a strong emphasis on index liquidity, investability and replicability.

The index is reviewed quarterly—in February, May, August and November—with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large and mid capitalization cutoff points are recalculated.