Cash-rich domestic investors are flocking to short-term investment instruments to protect themselves against market volatility amid a prolonged coronavirus pandemic.
This is according to Rizal Commercial Banking Corp. (RCBC) trust and investments group head Robert Ramos, who reported that unit investment trust fund clients have mostly been subscribing to products with less volatility, such as money market funds and short-term funds.
“It is very intuitive; investors don’t want to take added risks. Thus, they invest in the two,” Ramos said in a press statement on Monday.
He reported that the volume of RCBC’s money market products for both peso and dollar had risen to P9.4 billion in October from P6.2 billion in December 2019. In the same period, Rizal Peso Money Market Fund had grown to P5.1 billion from the previous P2 billion.
Likewise, Rizal Dollar Money Market Fund saw an increase in volume to P703.9 million from P321.5 million in the same period.
Ramos said that any reversal of interest rate trajectory would affect all fixed-income securities, taking into consideration factors such as inflation, low-interest rates environment, investment terms and hopes for economic recovery.
“The shorter the investment term, the less the impact. When the market expects the interest rates to adjust against their position, they buy the shortest possible fixed income asset to manage this price risk,” he added.
Likewise, short-term funds can be used to temporarily park funds to earn reasonable interest income as they can provide higher potential returns than traditional time deposits.
RCBC Rizal Peso Money Market is invested in short term fixed income securities such as government securities, and corporate bonds, providing potential higher returns than traditional deposit products. As of end-December, its year-on-year return stood at 3.78 percent.
Meanwhile, Ramos said the Rizal Equity Fund, RCBC R25 Blue-Chip Equity Fund, and RCBC R25 Dividend Equity Fund were suitable for clients who can take more risk in their portfolio. These funds are invested in company stocks listed on the Philippine Stock Exchange. INQ