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In pursuit of the ideal investment funds

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CFA Society Philippines awards PHL’s Best Managed Funds

By Bjorn Biel M. BeltranSpecial Features Writer

The Philippines is still on track to meet its economic targets this year, expanding at a rapid 6.2% gross domestic product growth in the third quarter on the back of bigger government expenditures and robust household spending.

Bolstered by such growth, the local investment community is bursting with activity. In the Philippine Stock Exchange’s 2018 stock market investor profile report, total accounts had reached 1,089,443, 25.4% higher than the 868,810 accounts in 2017. Much of this was due to a 60.9% increase in the total number of online accounts to 625,763 in 2018 from 388,864 a year before.

It stands to reason that many more Filipinos are learning to invest this year. Filipinos are in a great position to take their financial security into their hands, but with the investment landscape as vast and as daunting as it is, newbie investors can easily get lost.

This is one of the reasons why the Chartered Financial Analyst (CFA) Society Philippines is continuing and refining its Best Managed Funds of the Year Awards to recognize institutions that deliver the highest returns and the best value to investors, in spite of different volatilities.

Held at the SMX Convention Center Pasay, the annual event aims to uphold the standards for professionally-managed funds and to acknowledge the institutions which have exemplified the global standards in the finance and investment industry.




“Now on its third edition, the best managed fund of the year continuously work toward recognition of the funds that have consistently performed well looking at both the funds’ returns and risks. To highlight CFA Society Philippines’ commitment to promote standards that protect investors, additional points were accorded to firms that are compliant with the asset manager code of conduct,” Rizchelle S. Manaog, CPAE, program director at the CFA Society, told BusinessWorld.

Consistency and transparency

The winners were assessed by the CFAP Fund of the Year Committee, which reviewed the financial institution’s submission of investment information and fact sheets. What differentiates the Best Managed Funds of the Year Awards is that the committee used the Sortino ratio of each fund based on its five-year and three-year track record to evaluate the best returns for investors.

The Sortino ratio differentiates negative volatility from total overall volatility by using the asset’s standard deviation of negative returns, called downside deviation, instead of the total standard deviation of portfolio returns.

“To me, a well-managed fund is something that consistently delivers value to investors. Investors get the returns that they need without exposing them to unnecessary risk,” Mark Jasson C. Ilao, CFA, CIPM, said.

“The awards were designed to capture that kind of value proposition. For the side of the fund managers, it’s like a badge that they can refer to say that they’re doing something right. On the part of the clients, it assures them that their money is in the right hands,” he added.

Mr. Ilao added that the awards were created partly to emphasize the professional ethical standards that the CFA Institute stands for: that is, creating an environment where investors’ interests come first, markets function at their best, and economies grow. The awards also give investors a baseline to become more aware of the track record of the available funds and the institutions that offer them.

Jerome Go, CIPM, pointed out that there is a tendency for funds to take on additional risks that go beyond the limit of their fund’s investment mandate in a bid to get higher returns, which ultimately hurts the investors in the long run.

“In a way, it’s unethical because you are violating your duties to the client. Each return has a corresponding risk. You’re lucky if you get higher returns by taking unnecessary risks, but if you look at the whole investment cycle those risks will catch up with you. It’s a violation of your duties to your customers. You’re lucky if you turn a profit, but what if you don’t?,” he said.

To further encourage funds to strive for an ideal of consistency and prudence, the CFA Society also added a bonus to institutions that followed the Asset Managers’ Code, which outlines the ethical and professional responsibilities of firms that manage assets on behalf of clients.

These principles and provisions address six broad categories: (1) loyalty to clients, (2) investment process and actions, (3) trading, (4) risk management, compliance, and support, (5) performance reporting and valuation, and (6) disclosures.

As the Philippine economy grows and technology makes investing more accessible to the public, Mr. Go and Mr. Ilao hope that more attention is given to institutions and investment funds that not only provide great returns, but also consistently provide what is best for the public.

“Consistency is one of the things that investors look at. The tendency of people is to chase the winners, not realizing that more often than not these winners are just one-time outperformers. I think it’s better to pay attention to funds and institutions that deliver consistent results over time. They might not be the highest performers year-in year-out, but their consistency is always there,” Mr. Ilao said.

“If more customers start to invest, it will generate more revenues for companies and the companies can hire more people to undergo financial training and invest in better education for the public. It’s a beneficial loop,” Mr. Go added.

The Best Managed Funds of the Year

The CFA Society Philippines gave awards in seven categories, both in peso-denominated and dollar-denominated funds. Only the funds accessible to the public or retail investors were considered.

Here are this year’s winners:

MEDIUM TERM BOND refer to funds using fair value profile and loss valuation purely (FVPL) with maturity duration up to five years.

Peso Medium-Term Bond — Metrobank, Metro Max 3 Bond Fund

Dollar Medium-Term Bond — Asia United Bank, Gold Dollar Fund

LONG TERM BOND refer to funds using FVPL but with maturity duration greater than five years.

Peso Long-Term Bond — United Coconut Planters Bank, Peso Bond Fund

Dollar Long-Term Bond — Chinabank, Dollar Fund

EQUITIES refer to investments that were kept in cash for liquidity or rebalanced with other portfolios. In this award category, only actively managed equity funds were eligible to participate.

Peso Equity Fund — ATRAM, Alpha Opportunity Fund

Dollar Equity Fund — BPI, Global Equity Fund-of-Funds

BPI also bested others on the Balanced Funds Peso category with its BPI Balanced Fund. The mandate for balanced funds (using FVPL) is to invest in a diversified portfolio of bonds and stocks with investment in stocks up to a maximum of 40 to 60% of the fund.

“True to the vision of CFA Society Philippines to advocate integrity and excellence in the investment industry, we are proud to announce this year’s winners for best managed funds,” Cristina Arceo, president and chairman of CFA Society Philippines, said.

“The awards are testament to institutions which put primary importance on caring for the investors’ interests. By pursuing this mission, we help strengthen investors’ trust in the investment industry to achieve a well-functioning capital market and sustain our country’s economic progress,” she added.

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