Fee on PSEi-tracking investments worries fund managers

The Philippine Stock Exchange plans to impose a fee on all investment funds that track its main stock barometer, raising concern among fund managers that this will discourage investing in PSE index-benchmarked funds.

The plan was to impose a fee equivalent to three basis points of the assets under management (AUM) of PSEi-tracking funds using a new PSEi licensing exercise, but this has been deferred to pave the way for consultations with the fund management industry.

“The exercise is consistent with the protection of the intellectual property (IP) rights of the PSE under the existing IP laws and regulations. The benchmarking study that we conducted likewise revealed that other peer stock exchanges have implemented the same framework earlier for their data and IP rights,” PSE chief operating officer Roel Refran said in a text message, when asked about the proposal.

“We have engaged with the fund managers and other relevant stakeholders on their views and inputs. We are carefully evaluating the considerations raised by the fund managers as to timing and implementation suggestions,” he said.

The PSEi is composed of 30 of the country’s largest, most liquid and most capitalized companies in the local stock market.

Several fund managers told the Inquirer that the proposal to charge the equivalent of 3 bps of AUM had been vehemently opposed by the fund management industry.

While the fund managers are willing to pay the price for tracking the PSEi, they said that a fee-structure based on the AUM would be too costly. Most are favoring a fixed fee, which they said would be in line with what other index providers like MSCI charge.

In the case of MSCI, a fund manager said the existing fee already included other services beyond the provision of indices.

The proposal to charge PSEi-tracking funds was originally set for implementation in August but was deferred as the PSE agreed to hold consultations.

Fund managers are hopeful that forthcoming discussions with the PSE would result in a more reasonable fee structure.

Apart from suggestions for the PSE to charge a flat rate, other options include using a tiering system, which means the fixed charges would vary in proportion to fund size.