The Right Mutual Funds for You

Whatever your risk appetite, we chose the best performing mutual funds for you.
By Heinz Bulos

HE mutual fund industry in the Philippines may be still at its infancy (technically, it started in the sixties, but it remained dormant until the 1990s) and is miniscule (just 0.17 percent in total net assets to total stock market capitalization), but its the fastest-growing industry among similar investment vehicles (84.4 percent average growth since 1997), according to a University of the Philippines study, entitled The Development and Performance of the Philippine Mutual Funds Industry.
Compared to savings and time deposits that return measly interest rates, mutual funds are fast becoming a much better but still relatively safe alternative for Filipino investors. Despite the growth, the Philippine mutual fund industry pales in comparison to even neighboring countries. The number of mutual funds in Hong Kong, Taiwan, Japan, and South Korea number in the hundreds or thousands. We have some 21 funds, but only a handful dominates the industry. There are four types of mutual funds available in the market: stock funds, bond
Fund Philequity Fund Philippine Index Fund Philam Bond Fund Ayala Life Fixed Income Fund Sun Life Prosperity Bond Fund Philam Dollar Bond Fund Philam Fund Sun Life Prosperity Dollar Advantage Fund Source: Investment Company Association of the Philippines, as of January 31, 2004 Type Stock fund Stock fund Bond fund Bond fund Bond fund Bond fund Balanced fund Balanced fund

funds, balanced funds, and money market funds. Stock and balanced funds (a mixture of equities and fixed income instruments) have been shrinking since 1999, partly due to the anemic local stock market. Money market funds, introduced only in 2001, appear to be also on the decline, though the trend is inconclusive given the short history. Bond funds make up the bulk on the market, growing by 233 percent from 1997 to 2002. The industry is dominated by three players: BPI Asset Management and Trust Group, Philam Asset Management Inc., and
Year-to-date return 0.84% -0.83 1.53 1.60 1.55 0.91 0.80 0.09 1-year return 32.81% 43.23 9.45 7.85 8.09 5.27 25.64 4.89

Sunlife Asset Management Co., Inc. These three own the bulk of net assets and number of accounts. Despite the dominance of bond funds, dont disregard stock and balanced funds. Theres not much local historical data to analyze, but in theory, funds that invest in equities tend to outperform fixed income funds over the long term. For instance, Philequity Fund, one of the first funds in the local industry, having started in 1994, registered a four-year annualized return of 14.02% as of March 17 of this year,
3-year return 9.91% n.a. 9.34 8.18 9.02 n.a. 8.78 n.a. 4-year return 14.02% n.a. 9.38 8.48 n.a. n.a. 4.99 n.a.

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outperforming other funds with a four-year history. At 9.91% three-year return, it leads the rest as well. Among the four equity funds available in the market, Philequity Fund is our pick. It already has a consistent track record to speak of. Then theres the Philippine Index Fund of BPI Investment Management, Inc., a stock fund that tracks the stock market index. Index funds are quite popular in the US, and are often recommended by many financial advisors, given that most actively managed mutual funds have not consistently beaten the market, what with their higher sales load, management fees, and higher taxes from active trading. The Philippine Index Fund posted a one-year return of 43.23%, more than the four actively managed stock funds, or any of the balanced and bond funds for that matter. Note, however, that year-to-date, it posted -0.83%, worse than the rest save for Legacy GS Fund. UCPBs United Fund also appears to be consistent, posting a four-year return of 7.07%, but we do not recommend it as other bond funds did even better. Philam Bond Fund performed best among six active bond funds, with a 9.38% four-year return. Ayala Life Fixed Income Fund, a favorite among institutional investors, posted 8.48% in the same period. Sun Life, a relatively new comer, also has an impressively performing bond fund, the Sun Life Prosperity Bond Fund, which thus far generated a three-year return of 9.02% (compared to Philam Bond Fund with 9.34% and Ayala Life Fixed Income Fund with 8.18% for the same period). Balanced funds have been more unpredictable. There hasnt been a consistent performer except for Philam Fund, with a 8.78% three-year return and 4.99% fouryear return. Among funds that dont have a three-year track record yet to speak of, there are two dollar-denominated funds to watch out for: Philam Dollar Bond Fund (5.27% one-year return) and Sun Life Prosperity Dollar Advantage Fund (4.89%).

PHILAM ASSET MANAGEMENT INC.

Philam Bond Fund, Inc.
Fund Performance (December 2003) Assets Under Management ................................................... P6.82 billion NAVPS as of December 31, 2003 ............................................... P1.8728 Yield (Year to December 31, 2003) ................................................ 6.33%

Philam Fund, Inc.

Fund Performance (December 2003) Assets Under Management .................................................. P34.2 million NAVPS as of December 31, 2003 ............................................... P4.2124 Yield (Year to December 31, 2003) .............................................. 24.12%

Philam Dollar Bond Fund, Inc.

Fund Performance (December 2003) Assets Under Management ................................................ $156.6 million NAVPS as of December 31, 2003 ............................................... $1.1595 Yield (Year to December 31, 2003) ................................................ 5.75%

SUN LIFE ASSET MANAGEMENT COMPANY

Sun Life Prosperity Bond Fund
Provide regular interest income and capital preservation through investment in high-quality fixed-income securities issued and guaranteed by the Philippine Government as well as debt papers aggregating below average risk issued by prime Philippine companies Fund Performance (December 2003) Assets Under Management ..................................................... P4.4 billion NAVPS as of December 31, 2003 ............................................... P1.3935 Yield (Year to December 31, 2003) ............................................ 8.4014%

Sun Life Prosperity Dollar Advantage Fund

Generate long-term returns consisting of current income and capital growth in US Dollars consistent with prudent management of the Funds assets. Fund Performance (December 2003) Assets Under Management ................................................ $5.491 million NAVPS as of December 31, 2003 ................................................. 2.1194 Yield (Year to December 31, 2003) ............................................ 3.8413%

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