Investment Tips and Articles

BDO INVESTMENT TIPS:

Financial goals to achieve before turning 30

By: Michaela Romulo

It is understandable that for first time investors, the thought of investing your money can be intimidating. Where do I start? Where do I invest my money? Banks are now offering investment funds to help you make those decisions. These funds are set up based on how much money you are willing to invest in and for how long, and how much risk you are willing to take for your investment to bear fruit.

 

But achieving financial independence by the time you are 30 takes more than just investing your money in the right place. Below is an infographic that outlines key financial milestones you should achieve that will help put you on the path to financial independence. — Rappler.com

 



 

Read the full article here: http://www.rappler.com/brandrap/stories/87360-financial-independence-goals-money-matters


 

BDO Easy Investment Plan – A Solution to Investor Concerns

BDO Easy Investment Plan – A Solution to Investor Concerns

 

Are you an investor or a would-be investor who worries about any of the following questions and concerns?

  1. Beating Inflation. I am worried that the purchasing value of my investments might just be eroded by inflation that is now on an uptrend. I want investments that are able to yield above the inflation rate.
  2. Minimum Investment Amounts and Potential Returns. I do not have substantial amounts to invest. However, I would like to earn like a big investor and like to take advantage of compound interest. Would that be possible?
  3. Investment Expertise. I would like to invest but I do not have expertise in this field nor the time to study this.
  4. Saving and Investing. Discipline. I would like to have and sustain the discipline to save and invest on a regular basis over an extended period of time to meet my investment goals. Is there a way that I can make saving and investing automatic?
  5. Fund Management Costs. I would like to minimize my investment costs. Is the management fee that I pay my bank the lowest in the industry? Am I paying more than what is necessary? Can I do away with paying agent’s commissions, front and back-end fees?
  6. Liquidity. What is the minimum holding period? Will I be penalized if I redeem within the holding period? I want investments that I can redeem in case of emergencies.
     

If you have asked any of the above, worry no more. BDO’s Easy Investment Plan provides a solution to all these investor questions and concerns. The EIP is designed to allow you to:
 

  1. Beat inflation by investing in the bond and/or equity markets, not simply in bank deposits.
  2. Make investments affordable in amounts as small as Php 1,000 per month but immediately earning as much as large accounts. Further, the BDO investment funds wherein EIP are placed, allow clients to automatically reinvest earnings to enjoy compounding effects.
  3. Gain access to the services of BDO professional fund managers who keep constant watch over the BDO investment funds and who have a track record of consistent fund performance.
  4. Automatically transfer your funds regularly from savings to investment at the time and frequency of your choosing with no extra effort on your part.
  5. Participate in the growth of the Philippine economy at the least possible cost – low management costs and no entry, exit fees and agent’s commission.
  6. Withdraw contributions anytime without penalty 30 days after it has reached the regular minimum investment amount of the particular fund. 

Check out the BDO Easy Investment Plan. Please contact: BDO Trust Makati at (632) 840-7000 locals 4265/ 4244/ 4035/ 7032, Trust Cebu Desk (6332) 231-1131 or Trust Davao Desk (6382) 221-8959. You may also visit www.bdo.com.ph/trust or email: 

WHY SAVE and INVEST EARLY?

Does saving and investing early really make a big difference for your financial future?

To answer this question, Trust and Investments Group would like to tell you a story about the twins Mara and Clara. Both were 25 years old, with good job after graduating from college when they made the following financial decisions:

Mara started to save for her financial future immediately. She contributed P1,000.00 to her retirement fund each month (or P12,000.00 yearly). But Mara stopped her contributions after 10 years because she had to prioritize other financial obligations that built up over the years.

Clara wanted to enjoy her hard earned money right away. She believed that she was likely to earn much more money later on so she opted not to save for her financial future for the next 10 years. But at age 35, she committed to saving and investing P2,000.00 monthly for the subsequent 15 years (or P24,000.00 yearly).

Clara and Mara both invested their savings into a collective investment fund that yielded a 10% average annual return.1

Who do you think ended up with a bigger retirement fund when both turned 50?
 

Age Mara Clara
Contribution for the period Earning for the period Contribution for the period Earning for the period
25 to 35 120,000.00 86,596.08    
35 to 40   126,128.98 120,000.00 36,198.24
40 to 45   203,131.98 120,000.00 136,993.93
45 to 50   327,146.08 120,000.00 302,833.71
 
SUMMARY at 50 Mara Clara

Total Contributions

120,000.00

 

360.000.00

 
Total Earnings   743,003.11   476,025.88
Total Savings Amount   863,003.11   836,025.88

We did the math and have concluded that Mara's savings of P120,000.00 over 10 years ballooned to P836,003.11 while Clara's savings of P360,000.00 has grown only to P836,025.88 when both ladies reached age 50. Clara's contribution was twice as much as Mara's and Clara contributed for a longer period of 15 years compared to Mara who only contributed for 10 years. How did this happen? It is because Mara was better able to make use of the power of compounding interest compared to Clara. Mara used time to her advantage. She made money work for her. With no additional effort on her part, Mara's earnings started to grow even more than Clara's contributions starting at age 35. Thus, it look 3 times the amount of contributions and the next 15 years for Clara to come close and catch up with Mara's 10-year head start in saving and investing. It's easy to see why Albert Einstein said, "Compound interest is the greatest wonder of the universe."

 

1(The 10% yield used in this article is for illustration purposes only and should not be construed as the historical return neither of collective investment funds nor as a guarantee of future performance.)

 

Saving and investment early is the smarter alternative as you will clearly be at an advantage over those who may save and invest more for a longer time later in their lives.

 

For a brighter financial future, save and invest money the earliest you can!

 

(Reference: www.investopedia.com)

The Investment Life Cycle and the BDO UITF

 

As you progress through life, you and your financial situation will inevitably undergo changes. You will experience an evolution of needs that transforms your financial existence from complete and utter dependence on others at one end to, hopefully, total financial freedom at the other. From birth to perhaps, your pre-professional life, you rely on others for practically all your basic needs. As soon as you are capable of earning, this dependence diminishes and you begin to become self-reliant in meeting your own needs. Ideally, after meeting these needs, you would still have something set aside that you could save and invest. Over the years, what you have set aside would have grown into a decent nest egg that you could draw upon when your earning capacity declines and, eventually, stops altogether. Obviously, for this to come to full fruition, your financial resources need to be accumulated, grown and preserved. This cycle of harnessing your resources to support a chosen lifestyle may be referred to as the Investment Life Cycle.

The accumulation phase of your Investment Life Cycle usually coincides with age 20 to 40. The is the period when you are at the prime of your health and the time when your earning capability is also growing. As you save and invest, you accumulate wealth. Since this is a relatively early stage in your life, you have time in your hands and can afford to invest your funds in high-risk outlets in exchange for higher returns. You have the capability to become more of a risk taker because you cope better with risk at a younger age.

At age 40 – 60, you enter the consolidation phase. This is the stage in your life when you start to realize that as you get along in years, you have to slow down since working as hard as you did when you were younger may no longer be possible. Age now enters the equation when you ponder investment considerations, given that your earning capacity may now eventually slow down. Naturally, you would want to protect whatever wealth you have accumulated over the years so that when the time comes, your post-retirement needs will be adequately met. Your tolerance for risk is not what it used to be, but the experience you have gained during your accumulation phase and the capital you now control because of it allow you to profit from lower risk investment. In terms of assessing your own risk profile vis-à-vis your investment priorities, you tend to tolerate moderate risks for moderate returns.

Beyond age 60, the spending or gifting phase kicks in. This is when your main source of financial support may no longer be your job or your business but the wealth you have built up and consolidated over the years. Generally, during this period, spending outpaces inflows since you have to pay more for day-to-day needs, medical bills, and other age- and retirement-related expenses than what comes in by way of earnings on your nest egg. It is also referred to as the gifting phase since this is the period when you begin to take serious action on the financial legacy that you will leave your heirs. As such, your primary concern during this period is the safety of your investments. Your capacity or tolerance to take any more risk on your investments is on the decline. In other words, this is the phase when you tend to be risk averse with respect to the kind of investments you go into.

Whatever financial crossroads you may find yourself in, BDO Trust and Investments Group (TIG) not only can provide you with insights into the financial considerations that will impact on your life as you experience both planned and unplanned events, but also offer you carefully thought-out investment options to meet your requirements.

Among these options are the BDO Unit Investment Trust Funds (UITFs). Unit Investment Trust Funds are open-ended pooled trust funds made available to investors through units of participation, valued on a marked-to-market basis to comply with international best practices. UITFs are differentiated from one another by their respective investment objectives, policies and limits, as declared by the Trustee or Fund Manager at the funds’ inception.

If you are in the accumulation phase of your investment life cycle, you are likely able to withstand more risk than those in the consolidation and the spending stages. As such, you can probably afford a significant exposure to the BDO Peso Balanced and Equity Funds, which are appropriate for investors who have a longer investment time horizon and who are aware of the potential for high yields in stock market investments but are also knowledgeable of the potential for capital losses that such investments entail. The BDO Peso Balanced and Equity Funds are peso-denominated funds aimed for capital appreciation over the medium-term by investing in stocks. The BDO Peso Balanced Fund invests in a combination of stocks and fixed income securities, the allocation of which is determined by BDO TIG, depending on market conditions. The BDO Equity Fund, on the other hand, is predominantly invested in equities as selected by BDO TIG.

Investors in their consolidation phase, who can still tolerate some risk, but not as much as when they were in their accumulation phase, should perhaps reduce their exposure in the Balanced and Equity Funds and increase investments in funds that, in comparison, have slightly lower risk profile. The BDO Peso and Dollar Bond Funds, as well as the BDO GS Fund seek to take advantage of higher yields offered by medium-term securities by investing in bonds and other similar fixed-income securities with a portfolio weighted average life of more than one (1) year. These are particularly suited for clients who are looking for higher yields but willing to take the attendant risks due to the longer term of the Funds’ investments. Meanwhile, the BDO Peso Fixed Income Fund is a peso-denominated fund that aspires to provide its participants a high level of income while preserving principal and maintaining liquidity, by investing in a combination of short-term and long-term fixed income securities. These Funds are designed for clients who are looking for investments that have moderate yields and can tolerate moderate risks.

Those in the spending or gifting phase have risk profiles consistent with those of the BDO Peso and Dollar Money Market Funds and should thus consider a high concentration of their investments in these funds. These aim to preserve capital and generate income with minimal risk by investing in fixed income securities with a portfolio weighted average life of not more than one (1) year, and are thus suited for clients who are risk averse and prefer safe investments with yields higher than those of savings and time deposit accounts.

Thus, whatever investor classification you may fall under, whatever risk profile or time horizon you may have, there is a BDO UITF that will work for you. This is because BDO doesn’t just “know” investments. It also understands investors – their needs, their aims, and their situations – and seeks to match these variables with the available outlets in the market.

Knowing the different phases in your Investment Life Cycle is vital to your quest for financial well being. It is very important to know the conditions that would influence your needs so that you could make the necessary allowances for differing circumstances. Where are you in your life? How much do you need? What is the next stage of life for you? The answers to these questions will have a direct impact on the way you set aside funds so that you can grow old comfortably and leave some financial legacy for your loved ones.

*BDO UITFs are trust products. They are not deposits and are not insured by PDIC. Due to the nature of the investments and the marked-to-market valuation thereof, regulations do not allow the guarantee of yields. Historical performance data, when presented, are purely for reference purposes only and are not guarantees of future returns.

To learn more about the BDO UITFs, visit any of our branches nationwide. You may also call BDO Trust Makati Head Office at (632) 840-7000 locals 4265/ 4244/ 4035/ 7032. Trust Cebu Desk at (6332) 231-1131 or Trust Davao Desk at (6382) 221-8959, You may also visit  www.bdo.com.ph/trust or email: 

 

Matching the Right UITF for your Investment Needs

Many investment gurus consider pooled funds like the UITFs as one of the most practical vehicles for growing your investments. However, it is important that Client Investment Suitability Assessments show that you are qualified to invest in these pooled funds. Once qualified, the next step is to ascertain that you are comfortable with your choice of UITF investment. This article will help you choose the right UITF investment for you.

Your choice should conform to the length of time you can afford to keep your funds invested and the amount of risk that you are willing to take in order to achieve your desired returns. Generally, funds that are invested for shorter periods yield lower returns and are less volatile or risky. On the other hand, funds that are invested for longer periods achieve higher returns but because of the tenor, such investments are more exposed to volatility, hence more risky.

BDO UITFs in the Risk-Time Horizon Ladder

This investment truth is clearly seen in the above table which presents an investment ladder that shows the position of each of the BDO UITFs in terms of increasing degree of investment risks taken and the recommended time horizon for each fund. Note that the performances of BDO UITFs since inception have been true to their investment objective, with each classification of funds delivering yields commensurate to time invested and risks taken since their inception dates.


The BDO Money Market Funds occupy the lowest step of the ladder as these funds are offered primarily for risk-averse individuals and corporate investors. The short time horizon of the funds gives returns relatively on the low-side but are relatively higher than those of savings and time deposit accounts.

BDO Peso Money Market Fund’s Compounded Annual Growth Rate (CAGR) since inception stood at 4.71%, beating the CAGR of its benchmark 91-Day T-Bill. The same is also true for the BDO Dollar Money Market Fund with CAGR of 3.50%, higher than the 0.63% CAGR of its benchmark Bloomberg Philippine US$ Savings Rate. In order to minimize risks and maximize earning potential, participants of these funds are recommended to stay invested for at least six (6) months.

The Bond Funds (BDO Peso Bond Fund, BDO Dollar Bond Fund, BDO Peso Fixed Income Fund, BDO GS Fund, and BDO Medium Term Dollar Bond Fund) are developed for investors who are risk tolerant and who have longer investment time horizons. These funds are more volatile but posted higher returns as compared to money market funds because of the tenor.

Participants of BDO Peso Balanced Fund and BDO Equity Fund, the funds with the highest level of risk and longest time horizon and occupying the highest steps of the ladder, are recommended to stay invested for more than three (3) years in order to minimize risk and maximize earning potentials. These funds are suitable for risk-taking individuals or corporate investors who seek potentially higher returns through stock market investments but are also aware of the possibility of capital losses that such investments may entail. These funds posted a CAGR since inception of 13.80% and 20.18%, respectively, the two highest among all BDO UITFs.

The performances of the different UITFs, as measured by the average annual compounded returns since their inception dates, lend credence to the investment principle that the key to investing is time.

Consider your time horizon
Given this investment insight, here is what BDO Trust has to say. If you wish to earn the highest returns, do so by investing in riskier funds, and to actually attain such returns, you must be prepared to remain invested for longer periods of time as this enables you to weather temporary volatilities that may occur along the way. These funds include equity and balanced funds such as the BDO Equity Fund and BDO Peso Balanced Fund. Also included are the intermediate-term bonds (BDO Peso Bond Fund and BDO Dollar Bond Fund) as well as medium term bonds (BDO Peso Fixed Income Fund, BDO GS Fund and BDO Medium Term Dollar Bond Fund).

However, if you can keep your money invested only for a short period of time, it is best that you put your money in low-risk funds such as the BDO Peso Money Market Fund and BDO Dollar Money Market Fund, as these will provide you liquidity and above average returns compared to regular time deposits.

But keep in mind that investing too conservatively over the long term is also risky because your money may not grow enough to achieve your goal (e.g. retirement savings), especially when you consider that inflation erodes your purchasing power over time. If you have longer time horizon, you may increase the growth of your savings by investing in longer tenor bonds, equities, or both.

Thus, when you are aware of the investment principle that the key to investing is time, there will be no investment surprises.

Review your risk tolerance
Your ability to tolerate risk may also change over time, and you should take this into account when you predict the growth of your portfolio. Most young participants are able to invest in funds with higher level of risk. But we recommend that all UITF investors should regularly update (at least every three years) their Client Suitability Assessment as their time horizon shortens or as other life circumstances make it more important to have a steady fund balance (for example, you could be getting married, having children, sending them to school, growing a business or planning to retire). You need to continuously review your financial goals and make sure you are on the track where you want to go.

We are certain that our UITFs are excellent investment options as there is an available BDO UITF that caters to the changing needs of each client.

Building Wealth: Using the Peso Cost Averaging Strategy

An investment myth that many Filipinos believe in is that one has to have a substantial amount of money in order to invest successfully in bank or trust products. This, however, need not be the case as investing smaller amounts also has investment merits provided that this is done regularly over a sustained period of time. For such small but regular investments, the concept of peso cost averaging can come in handy. This is also called dollar cost averaging (DCA) in the US, pound-cost averaging in the UK and by the currency-neutral terms unit cost averaging.

Peso cost averaging is a timing strategy of investing equal peso amounts regularly and periodically over specific periods in a particular unit investment trust fund, mutual fund, shares of stocks or other investment products. The objective of this strategy is to lower the total average cost per unit of the investment, giving the investor a lower overall cost for the units/shares purchased over time and consequently an opportunity to earn better. Effectively, more units/shares are purchased when prices are low and fewer shares are purchased when prices are high. This strategy also reduces the risk of buying investments at the highest price. As an added bonus, the strategy also encourages regular saving and investing as this makes these activities more affordable. Thus, this strategy can be used as one of the most powerful ways to build wealth.

Quite simply, peso cost averaging is a straightforward and functional strategy that can be used by anyone from investment experts to novices. This concept, however, usually works best for people who are not investment experts and who may not have the time, energy or knowledge to time their transactions.

To illustrate how the peso cost averaging works, we are providing a comparative example of 1) Mr. A who invested P300,000 in the BDO Peso Balanced Fund in one lumpsum of P300,000 five years ago on December 28, 2007 and 2) Mrs. A who also invested a total of P300,000 for the past five years, also starting on the same date as her husband but this time spreading her contributions of P5,000 to the BDO PBAL on every last banking day of the month. BDO-Trust did the math based on actual NAVpus and here are the results:

Comparative Investment Results after five years

 

Investments for the past year

Units Purchased

NAVpu as of Dec. 28, 2012

Investment Value as of Nov 29, 2012

Mr. A

300,000.00

121.4686

2,469.7742

414,331.21

Mrs. A

300,000.00

135.9168

2,469.7742

463,614.41

Difference

0

14.4482

 

49,283.20

Disclosure: *Historical investment performances presented above are purely for reference purposes only and not guarantees of similar future returns.

Because of the fluctuations during the five year period (range of P1,442.7272 to 3,411.0151) in the NAVPU of the BDO Peso Balanced Fund, Mrs. A’s investment results using the peso cost averaging strategy allowed her to purchase 14.4482 more units valued at P49,283.20 more than Mr. A during the same period with the same investment amount. It also averted the risk of buying units at a high point for Mrs. A, a risk which Mr. A took. Imagine if you could increase all your investments by 12% using this strategy….

But we should however be quick to note that there are also investment occasions where the lump sum investing done by Mr. A can be more advantageous. This occurs when there is an uptrending market and the unit prices of investments are steadily going up. In this case, Mr. A may come out as the winner. Nonetheless, Mrs. A, by making multiple purchases, can still be able to bring down the average cost of her investments.

For most individual investors, however, lumpsum investing may not be an affordable option especially in the case of retirement investment. Thus, the good news is that they can make use of the cost averaging strategy in investing, which involves a continuous and consistent investing of affordable amounts regardless of fluctuating NAVpu levels. This is a sound way of developing a regular investment habit. In addition, the systematic investing habit helps encourage long-term perspective, which can be soothing for people who might otherwise avoid the short-term volatility of the riskier but potentially more profitable investments, such as balanced or equity funds.

Given this investment insight, here is what BDO Trust has to say. Start with a consistent amount and set up a regular investment schedule. For those interested to invest in BDO Unit Investment Trust Funds, BDO Trust and Investments Group offers the “Easy Investment Plan or EIP”, a savings and investment scheme that makes use of the peso cost averaging plan. For BDO employees, the minimum increment is P1,000.00 a month. The EIP is one of the easiest and best ways to build wealth by investing fixed increments over time. At present, the UITFs available under the EIP are the BDO Peso Fixed Income Fund and the BDO Peso Balanced Fund.
 

BDO Trust wishes to dispel the myth that you can’t get started investing until you have a large amount saved up. You can start small, you can start smart – and you can come out ahead.
 

To learn more about the BDO Unit Investment Trust Funds available via Easy Investment Plan (EIP), please contact BDO Trust Makati at (632) 840-7000 locals 4265/ 4244/ 4035/ 7032, Trust Cebu Desk (6332) 231-1131 or Trust Davao Desk (6382) 221-8959. You may also visit www.bdo.com.ph/trust or email: 

Do You Know Where Saving and Investing P5,000 a Month Via the EIP Can Take You?

The BDO Easy Investment Plan (EIP) has come a long way since it was publicly launched internally  for BDO employees on April 2007 and subsequently launched to the public on November 2010 by BDO Trust. Clients who chose to invest in Unit Investment Trust Funds (UITFs) via the EIP are now on their way to attaining their financial goals and financial wellness through the twin habits of saving and investing. Thanks to the EIP, there is now a convenient, automatic, flexible and affordable solution to counter the major obstacles to saving and investing.

BDO Trust conducted a study to determine the absolute and the annualized internal rates of returns for investors who enrolled in the EIP during the past one, three and five years. The study assumed fixed contribution amount of Php5,000 every 30th of the month. The results are presented in below.
 

Past Five(5) Years  
Fund Total Contributions at P5,000 contribution per month (PhP) Market Value of Investments as of November 29, 2012 (PhP) Absolute Return on Investment (Net) Absolute Internal Rate of Return
BDO Peso Money Market Fund 300,000.00 326,220.90 8.74% 3.42%
BDO Peso Fixed Income Fund 300,000.00 363,472.67 21.16% 7.86%
BDO Peso Balance Fund 300,000.00 469,657.84 56.55% 18.56%
BDO Equity Fund 300,000.00 548,602.17 82.87% 25.17%

 

Past Three (3) Years  
Fund Total Contributions at P5,000 contribution per month (PhP) Market Value of Investments as of November 29, 2012 (PhP) Absolute Return on Investment (Net) Absolute Internal Rate of Return
BDO Peso Money Market Fund 180,000.00 188,797.62 4.98% 3.36%
BDO Peso Fixed Income Fund 180,000.00 201,831.92 12.63% 8.31%
BDO Peso Balance Fund 180,000.00 234,003.07 29.94% 18.74%
BDO Equity Fund 180,000.00 249,698.14 38.72% 23.75%

 

Past One (1) Year  
Fund Total Contributions at P5,000 contribution per month (PhP) Market Value of Investments as of November 29, 2012 (PhP) Absolute Return on Investment (Net) Absolute Internal Rate of Return
BDO Peso Money Market Fund 60,000.00 60,823.23 1.37% 3.03%
BDO Peso Fixed Income Fund 60,000.00 62,148.04 3.58% 7.99%
BDO Peso Balance Fund 60,000.00 65,340.54 8.90% 20.26%
BDO Equity Fund 60,000.00 67,235.40 12.06% 27.76%


The table shows that EIP participants earned rates commensurate to their risks taken regardless of the time period. It also shows how a minimal monthly contribution of Php5,000 can earn more compared to the regular special savings accounts and BSP Special Deposit Accounts.

Thus, in terms of actual returns, there is merit in investing in UITFs via EIP, more particularly when lump sum (one-time) investing is not an affordable option. The EIP gives the participant the capability of building a nest egg and growing it for some future financial need.

You can be confident that you are being prudent when you invest via the EIP. Aside from gaining access to the services of BDO professional fund managers who keep constant watch over the BDO UITFs, you will also benefit from cost averaging, a personal wealth-building strategy wherein fixed amounts of investment in regular intervals over a period of time allow you to average your costs, effectively diversifying your investments over time. Thus, you will be less affected by market swings. And since this allows you to invest without having to constantly monitor the market, any time is a good time to invest!

For more information on the BDO Easy Investment Plan, please contact: BDO Trust Makati at (632) 840-7000 locals 4265/ 4244/ 4035/ 7032, Trust Cebu Desk (6332) 231-1131 or Trust Davao Desk (6382) 221-8959. You may also visit www.bdo.com.ph/trust or email: 

Smart Retirement Planning Advice from BDO Trust

Whether you are just starting out on your first job, reaching mid-career, or planning to retire in a number of years, it is always a good time to continuously save and invest for your retirement. You can always do these no matter what your age or length of service is. There are advantages of building your retirement kitty at every stage of your career.

Contributing early can yield the most money

Although retirement may seem far away when you were first employed, the earlier you start saving and investing, the more money you will have when you stop working. Even if you can only afford to put aside a small amount, say Php 1,000 a month, it is wise to begin saving and investing as early as you can. You will not only accumulate more money by contributing for a longer period – you will also benefit from a process called compounding. With compounding, once your money begins to accrue earnings, the earnings start accruing earnings of their own. So your very own retirement portfolio keeps growing based on both the money you contribute and your earnings.

Mid-career saving and investing may be easier on your budget

Of course, when you reach mid-career, your income will probably be higher, so you will probably be able to build your funds more and thereby accrue greater earnings. Each time you get a raise or a promotion, you should consider increasing the amount of your regular contributions to your retirement account. The more you contribute, the more you earn – and the more your earnings earn.

There are still options if you have put off saving and investing

The longer you have waited to save, the more money you will have to put aside. Those with only a number of years to go before retirement and who feel that they have very low investment risk tolerance can still benefit from retirement planning. This has been made possible via the availability of investment funds whose main objectives are safety and liquidity, an example of which are the money market funds. Of course, because of the shorter period of time to contribute, you need to contribute a larger amount on a regular basis to achieve your goal.

The BDO Easy Investment Plan (EIP): A smart retirement planning tool

With all the discussions above, it would appear that retirement planning is a daunting task requiring extensive knowledge on asset allocation and market timing. If retirement planning seems like much trouble and effort, take a look at the BDO Easy Investment Plan (EIP).

BDO Trust makes saving and investing for retirement easier with the BDO EIP. The BDO EIP is a wealth build-up plan that enables you to attain your financial goals through the twin habits of regularly saving and investing. It incorporates what investment experts consider as the best, tried and tested principles that make a successful financial plan and provides a solution to counter the major obstacles to saving and investing.


To join the BDO EIP, you need to enroll your BDO checking/savings account under the BDO automatic debit facility wherein a fixed amount is deducted once or twice a month for immediate investment in a BDO Unit Investment Trust Fund (UITF). You can choose where your regular contribution will go from one or a combination of the following BDO UITFs: BDO Peso Money Market Fund (PMMF), BDO Peso Fixed Income Fund (PFIF), BDO Peso Balanced Fund (PBAL) and BDO Equity Fund (EQUITY).

The BDO EIP is the perfect opportunity for you to invest for your retirement! It’s simple. It’s easy and it’s automatic.

 

To know more about the BDO EIP, please visit  or email www.bdo.com.ph/trust or email: 

You may also call BDO Trust Makati at (632) 840-7000 locals 4265/ 4244/ 4035/ 7032, Trust Cebu Desk (6332) 231-1131 or Trust Davao Desk (6382) 221-8959.

News and Magazine Features:

Investment Insights: Navigating the Times (Philippine Star, April 17, 2017)
Open up to opportunities thru UITF investments
It is always a good time to invest... in UITFs (PDI / Philippine Star, June 27, 2016)

FOR most Filipinos, investing as a way to grow their funds is still regarded as a distant concept. Three things hinder this mindset from gaining headway into fulfillment: lack of investible funds; lack of basic knowledge about investments and the different investment instruments; and lack of fortitude to just push through with it.

Understanding this, BDO Unibank, through its Trust and Investments Group, offers the expertise, personnel and convenience to address these concerns through its Easy Investment Plan (EIP).

Start somewhere

Pinoys, in general, have difficulty saving—let alone investing—because all year round, their money goes in a multitude of places: debt repayments, tuition, hospital bills, house repairs, utilities, graduation expenses, vacation expenses, gifts, "traditions" (e.g. fiesta), new gadgets, birthday expenses, holiday expenses, and buying items on sale which they don't have a use for, except the fact that they are on sale.

If these spending habits can be tempered and a monthly budget involving only the essentials (utilities, food, daily allowance, and rent/amortization) are strictly followed, savings will eventually be generated. That will be the first crucial step. Out of these savings will come the investible funds. Some financial gurus even suggest to set aside the savings first before the programmed budget for expenses after every payday to ensure savings are made regularly.

For individuals who have set aside savings on a regular basis—no matter how small—and would want to delve into investments but are still unsure of the options available to them, the BDO EIP is the perfect package for them.

Rolled into one

Under the Easy Investment Plan, BDO enables investors to save and invest at the same time. It is designed for individuals eyeing for a medium to long-term investment plan, but doesn't have the knowledge nor the "one-time, big-time" budget to invest.

For as low as P1,000 a month, regular investments can be made in any of the instruments available under the EIP, either on the 5th, 10th, 15th, 20th, 25th, or 30th day of the month, or twice a month.

Investment instruments available under the EIP are the various Unit Investment Trust Funds (UITFs).

UITFs are an open-ended pooled trust fund valued on a mark-to-market basis, operated and administered by a trust entity. If an investor does not have the time nor knowledge to devote to actual bond and/or stock trading, a UITF is a viable option since financial experts will be the ones to manage the fund by investing in a wide variety of instruments such as bonds and equities. After putting in the money, investors can quite literally sit back and relax.

Being pooled funds, all participants in a UITF are invested in the same portfolio of securities and therefore harvest the same returns in proportion to each participant’s investment. This enables a small investor to earn like large and institutional investors who have patronized and grown the UITFs through the years.

BDO offers a basket of UITF options any investor—whether new or experienced—can choose from depending on their risk appetite and time horizons. The Bank, to date, offers the complete range of money market, bond, balanced, and equity funds denominated in pesos or US dollars. Its products account for around 40 percent of the entire UITF market in the Philippines.

In 2015, assets under management of BDO grew 12.22 percent to P917.35 billion from P817.48 billion the previous year, much bigger than the industry average growth rate of 1 percent during the same period.

Different finance publications have, in fact, taken notice of BDO Unibank's strong performance last year anchored on its Trust and Investment Group's leadership in the trust industry. In 2016, BDO Unibank was feted with the Fund House of the Year-Philippines by AsianInvestor Magazine; Best Investment Management Company-Philippines by World Finance Magazine (London); and Asset Management Company of the Year-Philippines and Impact Investor of the Year-Philippines by The Asset Magazine (Hong Kong)

.

Convenience

If there are money to be invested and different investment instruments to choose from, can prospective investors still be turned off by the difficulty in doing the actual investing?

Not under BDO.

BDO UITFs are available through the BDO's I-Online Facility or can be discussed by designated BDO personnel in any of its 940 branches.

Investing can likewise be made automatic through BDO's auto-debit facility, saving the investor from making physical trips to the bank branch. The BDO EIP account will be funded automatically through regular intervals from the investor's own BDO deposit account. The investor can even decide the intervals for his periodic investment, whether it is once or twice a month.

Indeed, under the BDO EIP, investing is easy as "1, 2, and 3."

This article was published in the TOAP’s Trust Consciousness Week Supplement in the Philippine Star and Philippine Daily Inquirer on June 27, 2016.

BDO UITFs Consistently Give Competitive Returns (Philippine Star, January 20, 2011)
The Trust and Investments Group of Banco De Oro Unibank, Inc. (BDO) has rewarded its clients last year with competitive returns on investments (ROI) from its various unit investment trust funds (UITF).

Figures showed that the ROIs of the Bank’s UITFs, namely, the Peso Money Market Fund, Peso Bond Fund, Government Securities (GS) Fund, Peso Fixed Income Fund, Peso Balanced Fund, Equity Fund, Dollar Money Market Fund, Dollar Bond Fund and Medium-Term Dollar Bond Fund, have performed better versus their respective benchmarks.

The same trend was likewise displayed by the Peso Balanced Fund, which posted a ROI of 39.81 percent in 2010 compared with the 19.02 percent performance of its benchmark - the average PSEi and the Bloomberg average 30-day special savings rate.

Ador Abrogena, executive vice president for BDO’s Trust and Investment Group, said “the Bank’s UITFs did not only perform well vis-à-vis their respective benchmarks in 2010 but also in the last five years, which included a global downturn in asset prices.”

Fund returns are normally compared to a benchmark which is a standard that has the same risk return characteristics as the fund being rated. The standard normally used is an index that represents the market for the securities that the fund invests in. Abrogena also stated that “the returns from the UITFs were commensurate with the risks taken by each UITF – high returns entail high risks, low risks produce low returns.”

UITFs are open-ended pooled trust funds operated and administered by a trust entity and made available by participation. Funds from various investors with similar investment objectives are pooled together into one fund, which the trust entity invests in different types of securities with the aim of maximizing returns within the level of risk allowed for that particular fund.

Trust and investments are just some of the industry-leading products being provided by BDO to retail and corporate clients. The Bank is also into lending, deposit-taking, foreign exchange, brokering credit cards, corporate cash managment and remittance. It also has subsidiaries that offer leasing and financing, investment banking, private banking, bancassurance, insurance brokerage and stock brokerage services.

2010 ROI of BDO UITFs vs BENCHMARKS


BDO UITF

BDO UITF Performance (net)

Benchmark (net)

Benchmark Performance (net)

BDO Outperformance

Peso Money Market Fund

3.55%

Bloomberg Ave 30-D SSA

2.19%

1.36%

Peso Bond Fund

9.10%

HSBC 1-3 Yr Bond Index

5.47%

3.63%

GS Fund

10.71%

HSBC 1-5 Yr Bond Index

6.48%

4.23%

Peso Fixed Income Fund

11.10%

HSBC 1-5 Yr Bond Index

6.48%

4.62%

Peso Balanced Fund

39.81%

Ave of the PSEi and the Bloomberg Ave 30-D SSA

19.02%

20.79%

Equity Fund

50.59%

PSEi

37.62%

12.97%

         

Dollar Money Market Fund

1.86%

US$TD Rate fm Bloomberg

0.37%

1.49%

Dollar Bond Fund

4.30%

1-3Yr ROP Index

3.10%

1.20%

Medium-Term Dollar Bond Fund

7.02%

3-5Yr ROP Index

4.61%

2.41%


FIVE YEAR (2006-2010) ROI of BDO UITFs vs BENCHMARKS

BDO UITF

BDO UITF Performance (net)

Benchmark (net)

Benchmark Performance (net)

BDO Outperformance

Peso Money Market Fund

23.33%

Bloomberg Ave 30-D SSA

15.78%

7.55%

Peso Bond Fund

35.04%

HSBC 1-3 Yr Bond Index

30.35%

4.69%

GS Fund

38.88%

HSBC 1-5 Yr Bond Index

34.56%

4.32%

Peso Fixed Income Fund

39.78%

HSBC 1-5 Yr Bond Index

34.56%

5.22%

Peso Balanced Fund

79.33%

Ave of the PSEi and the Bloomberg Ave 30-D SSA

58.02%

21.31%

Equity Fund

124.22%

PSEi

100.43%

23.79%

         

Dollar Money Market Fund

19.28%

US$TD Rate fm Bloomberg

3.78%

15.50%

Dollar Bond Fund

29.82%

1-3Yr ROP Index

24.39%

5.43%

Medium-Term Dollar Bond Fund

38.82%

3-5Yr ROP Index

27.78%

11.04%

Disclosure: *Historical investment performances presented above are purely for refrence purposes only and not guarantees of similar future returns.

To learn more about the BDO UITFs, visit any of our 730 branches nationwide. You may also call BDO Trust Makati Head Office at (02) 878-4265 or (02) 878-4244, Trust Cebu Desk at (06332) 231-1131 or Trust Davao Desk at (06382) 221-8959, or email .

This article appeared in the January 20, 2011 issue of Philippine Star.

 

BDO UITF Investors Rewarded for Taking Risks (Reader’s Digest, August 2012)

If you are ready to take risks and go beyond time deposits to achieve potentially higher returns, investing in BDO UITFs is the smart investment choice!

A Unit Investment Trust Fund (UITF) is a collective investment scheme offered by trust entities wherein funds from various investors are pooled together into one fund to achieve a specific investment objective.

There are different types of BDO UITFs aimed to meet your investment objective/s:

  • Money Market Funds – Invested in money market instruments; these have the lowest level of risk among UITFs and require the shortest investment time horizon.

  • Bond Funds – Invested primarily in bonds and fixed income securities, carrying higher risk and requiring longer investment time horizon than money market funds.

  • Equity Funds – Invested primarily in equity securities or stocks; these have the highest level of risk among UITFs and require the longest investment time horizon.

  • Balanced Funds – Invested in a mix of equity and fixed-income securities; with risk and investment time horizon in between those of bond and equity funds.

Investment gurus will tell you that your choice of UITF should conform to the length of time you can afford to keep your funds invested and the amount of risk that you are willing to take in order to achieve your desired returns. You need to determine the amount of funds you can invest as well as when you will need the funds to spend. Doing this will allow you the best returns given your investment time horizon and risk. Always remember the investment principle: “The best yields or returns can only be obtained if you have a longer investment time horizon.”

This investment principle is clearly seen in the diagram below which shows the position of each of the BDO UITFs in terms of increasing degree of investment risks taken and the recommended time horizon for each fund.

*Yield as of 12/28/2012 are Compounded Annual Growth Rates since inception of the funds; historical invesment performances presented above are purely for reference purposees only and not guarantees of similar future returns.


Investing in BDO UITFs proved to be rewarding for the participants. The performances of the different UITFs, as measured by the compounded annual growth rates since their inception dates, have been true to their investment objective, with each fund delivering yields commensurate to time invested and risk taken since their inception dates. These lend credence to the investment principle that the key to investing is time.

For details on the different BDO Unit Investment Trust Funds, you may visit www.bdo.com.ph; call (02) 878-4365 or (02)878-4244; or email .

This article appeared in the August 2012 issue of Reader's Digest but figures therein have been updated for year-end 2012.

BDO Trust Launches the BDO Easy Investment Plan (PDI, January 24, 2011)

Saving is, and always will be, the foundation of any fortune. It is secure, risk-free and readily accessible. But saving alone is not enough to make your money grow. You should also invest. This means taking some risks, but the rewards are higher. When you save and invest, your money has the power to grow faster.

With this in mind, BDO, through its Trust and Investments Group, developed the BDO Easy Investment Plan (EIP), an investment scheme that enables you to attain your financial goals and financial wellness through the twin habits of regularly saving and investing. It incorporates the best, tried and tested principles that make a successful saving and investment plan and provides a solution to counter the major obstacles to saving and investing.

To join the EIP, all you need to do is enroll your BDO checking/savings/payroll account under the BDO automatic debit facility wherein a fixed amount (with a minimum amount of PhP1,000.00) per month is deducted (once or twice a month) for immediate investment in your selected BDO Unit Investment Trust Fund (UITF). Every contribution you make participates fully in the investment performance of the selected fund as soon as the deduction is made. However, regular Confirmations of Participation (COP’s) will be issued only for accumulated contributions that have reached a market value of at least PhP 10,000.

UITFs are open-ended pooled trust funds operated and administered by a trust entity and made available by participation. Funds from various investors with similar investment objectives are pooled together into one fund, which the trust entity invests in various types of securities with the aim of maximizing returns within the level of risk allowed for that particular fund. Hence, each UITF participant has a proportionate interest in the UITF as a whole. UITFs are highly regulated and trust entities offering these are closely supervised by BSP to ensure investor protection. BDO UITFs available through the EIP are the following: BDO Peso Fixed Income Fund, BDO Peso Balanced Fund or the BDO Equity Fund.

Investment gurus have listed the following basic principles for successful saving and investing:
 

Saving and Investing Principles BDO Easy Investment Plan
Pay yourself first
Stop spending in things that decline in value
Make your financial plan automatic
Make money work for you
Invest wisely

The BDO EIP utilizes all the above principles making it an effective tool for saving and investing.

Note that BDO EIP is also multi-purpose since it can be used for any major project you would have set for yourself (i.e. education for your children, a vacation with your family, special family celebrations, retirement). This is unlike private and government pension funds and pre-need and insurance funds which can be withdrawn/distributed only upon retirement, disability or death.


In addition, the EIP enables you to benefit from peso cost averaging, a time-tested personal wealth-building strategy wherein fixed amount of investment in regular intervals over a period of time allows an investor to average his costs. This allows you to invest without having to constantly monitor the market. Any time is a good time to invest!

The BDO EIP is the perfect opportunity for you to invest. It’s simple, it’s easy and it’s automatic!

To learn more about the BDO Easy Investment Plan, visit any BDO branch nationwide. You may also call (02) 878-4265 or (02) 878-4244 or email . This article was first released on January 24, 2011 in the Philippine Daily Inquirer.

(This article appeared in the January 24, 2011 issue of the Phillippine Daily Inquirer.)

BDO UITFs: The Smart Investment Choice

If you are ready to go beyond time deposits, investing in BDO Unit Investment Trust Funds (UITF) is the smart investment choice! A UITF is a ready-made investment that allows the pooling of funds from different clients with similar investment objectives for the purpose of collective placements in various securities. There are several types of BDO UITFs: BDO Money Market Funds, BDO Bond Funds, BDO Balanced Fund and BDO Equity Fund. To choose the right UITF for you, determine your investment time horizon and the amount of risk you are willing to take. Shorter periods with low risk generally yield low returns as well. While longer periods with higher risks generally yield higher returns.

Performances of BDO UITFs versus Benchmarks since Inception as of December 28, 2012*

BDO UITF UITF
CAGR
Benchmark Benchmark
CAGR
Overperformance/
Underperformance
BDO Peso Money Market 4.71 91-D 2.98 1.73
BDO Peso Bond 7.11 HSBC 1-3Yr Bond 5.77 1.34
BDO GS 7.46 HSBC 1-5Yr Bond 6.13 1.33
BDO Peso Fixed Income 7.75 HSBC 1-5Yr Bond 6.23 1.52
BDO Peso Balanced 13.80 Ave. of PSEi & 91-D 10.69 3.11
BDO Equity 20.18 PSEi 18.33 1.85
BDO Dollar Money Market 3.50 Phil. 30-D $ 0.63 2.87
BDO Dollar Bond 5.85 1-3 Yr ROP 5.80 0.05
BDO Medium Term Dollar Bond 7.35 3-5 Yr ROP 7.15 0.20

Yields as of December 28, 2012 are Compounded Annual Growth Rates since inception of the funds (2003 for the BDO Peso Balanced Fund and 2005 for the rest of the funds). Historical performances presented above are purely for reference purposes only and not guarantees of future returns.

The performances of BDO UITFs as shown in the table above would show that they have been true to their investment objectives, with each classification of funds delivering yields commensurate to time invested and risks taken. The performances of the different UITFs lend credence to the investment principle that the key to investing is time.

For more details, email . This article first appeared in Smart Parenting, January 2012 issue. (updated December 2012)

BDO Retains Leadership in the Trust Business

BDO Retains Leadership in the Trust Business

 

BDO’s trust business posted a full year growth rate of 14.83% (P105.49 billion) as of end 2012. With BDO Trust and Investments Group (BDO Trust) contributing P665.8 billion and BDO Private Bank Wealth Advisory and Trust Group contributing P151.1 billion or a total of P816.9 billion Assets under Management (AUM), BDO maintained its top position in the local trust industry. It continued to solidify its market position as one of the country’s most trusted asset managers and retained 25.8% market share in an industry whose AUM is about P3.16 trillion.

This impressive performance resulted from the orchestrated efforts of trust personnel aimed at delivering products and services that ably answer the needs of its clients.  Such efforts centered on correctly matching the different trust products and services with the investors’ profiles, continuously creating/upgrading products and improving systems and methods, observing best practices in trading and portfolio management and implementing established operating processes, compliance policies and risk management practices as well as ensuring the training of its marketing team and the branches. Moreover, BDO also kept its clients updated on the performances of its products, market developments and investment opportunities.

To serve its clients best, BDO offers a complete range of trust and investment products and services to suit varying customers’ needs. It has a good mix of ready made and customized investment products, as well as specialized trust services targeting both personal and institutional businesses.

BDO is confident that with its line up of investment and specialized trust products coupled with the strong sales and service culture of its trust personnel and with the support of the other units of the bank, 2013 will be another banner year for its trust business.

ABS-CBNnews.com: Investing Made Easy with BDO by Cathy Rose A. Garcia

 

MANILA, Philippines - When it comes to saving money, most Filipinos seem to be content to deposit their hard-earned money in the bank, thinking that interest from the time deposits would be enough to make their money grow. But with the low interest rates, it's no longer enough.
 

Investing is key to personal financial success, but why don't people invest more? Some say they don't have extra money to invest, others say they don't know where to invest their money. Some are worried about the risks involved in investing, while others admit they don't know much about investments at all.
 

"The investment literacy of Filipinos is not that great," BDO Trust & Investments Group senior vice president Ma. Lourdes T. de Vera told ABS-CBNnews.com in a recent interview.
 

"Ang alam lang natin ay bank deposits, paluwagan. But investing is for everyone, not just the super-rich. But the bottomline is - investing is a need, not a choice,"
 

De Vera said people need to start saving and investing their money for the future. "We all know that we need to save and invest because we don't want to work forever. One day we want to rest and we don't know until when we can work. Investing provides you with more options," de Vera said.
 

But the question remains, how do you start saving and where do you invest your hard-earned money? Would-be investors are often concerned about affordability, risks, returns, convenience and flexibility.
 

De Vera said the Unit Investment Trust Fund (UITF) addresses these concerns. A UITF is a collective investment scheme where money is pooled from various investors into a single fund. The funds are invested in government securities, equities, corporate bonds, and other tradeable securities.
 

"UITF offers good value for investors. BDO has the lowest fees in the industry. There are no agents' commissions, no back-end fees. The performance (of the UITF) is better than benchmark. Liquidity and underlying assets are tied to your objectives, so the underlying investment works for your objective. This is very transparent, regulated by the BSP. Prices are available daily, while reports are available monthly and quarterly," de Vera said.
 

To make it easier and affordable for Filipinos to invest in UITFs, BDO is offering the Easy Investment Plan (EIP). Under the EIP, once you enroll your account, the bank will debit a certain amount (as low as P1,000) on a regular basis (once or twice month) to be invested in a UITF.
 

If you enroll in BDO's EIP, your money will be invested in a UITF that is most suited to your needs and concerns.
 

"UITF is not a one-size-fits-all product. How do you know which is the right UITF for you? Where are you in the investment life cycle? Are you in the 20-40 age group, 40-50? If you're around 20-40, you can afford to be more aggressive. But if you're around 40-50, you have to be more conservative. And you have to ask where you intend to use the money. The more immediate your need, the shorter your time horizon," de Vera said.
 

BDO offers 4 kinds of UITFs: Peso Money Market Fund (short-term fixed income securities), Peso Fixed Income Fund (medium to long-term fixed income securities), Peso Balanced Fund (combination of fixed income securities plus stocks) and Equity Fund (predominantly stocks). These are aimed at people with different risk appetites.
 

"If you're the type who can't take a lot of risk, you should in short-term fixed income securities. But if you're bolder, you can invest in a bond fund. But if you have excess money and afford to invest longer, you can buy a combo of fixed-income securities and stocks. If you're a risk taker and you're young, and you have time, you can go to an equity fund," de Vera said.
 

De Vera said UITFs offer better returns than time deposit rates and beats inflation. It also offers flexibility and liquidity, since it can easily be withdrawn.
 

Whatever your choice of UITF, de Vera said it is always good to remember the risk-reward rule: the higher the risk, the higher the reward; the lower the risk, the lower the reward.
 

However, UITFs do not offer any insurance or guaranty on principal and returns, so it is important to understand the risks that come with your investments. You should also choose a credible and seasoned fund manager, and know the regulatory safeguards for investor protection.
 

"When you invest with the trust department, we're on the same side. We're doing business for you as the client. We place your interest above all. We listen to you, what your investment goals are and we invest for you," the BDO executive said.
 

The BDO EIP also benefits from the "Peso Cost Averaging" strategy, where "fixed amounts of investments in regular intervals over a period of time allow you to average your costs." This allows one to invest without constantly monitoring the market.
 

De Vera said the EIP addresses the investing and saving concerns of investors. "With the EIP, saving and investing becomes a habit. It's simple, easy and automatic," she said.
 

BDO Trust and Investment Wins AsianInvestor's Fund House of the Year

Investment Performance Awards 2013

By The Editors | 25 April 2013

 

 

Today AsianInvestor announces its regional awards for Fund House of the Year across 14 markets.

MARKET AWARDS
 

Australia
AMP Capital

China
China Asset Management Company

China offshore
CSOP Asset Management

Hong Kong
AllianceBernstein

India
Reliance Capital Asset Management

Indonesia
Manulife Asset Management

Japan
Nikko Asset Management

Korea
Truston Asset Management

Malaysia
AmInvest
 

Philippines
BDO Trust and Investments

 

Singapore
Franklin Templeton Investments

Taiwan
JP Morgan Asset Management

Thailand
Krung Thai Asset Management

Vietnam
No award

From the AsianInvestor Website
http://www.asianinvestor.net/News/340817,investment-performance-awards-2013-day-2.aspx

 

 

Helping To Build the Philippine Funds Industry (AsianInvestor, June 2013)

Helping to build the Philippine funds industry

BDO Trust and Investments has ambitions in new areas, such as exchange traded funds and offshore investments, says group head Ador Abrogena.

With 666 billion pesos ($15.93 billion) in assets under management as of end-2012, BDO Trust and Investments is the biggest provider of trust services in the Philippines and the largest manager of unit investment trust funds. It is also the winner of AsianInvestor’s Philippine fund house of the year award this year.

Ador Abrogena, executive vice president and group head, spoke to us about his ambitions for the business and how the domestic trust industry is developing.

 

Q It’s been a volatile early ride for the Philippine funds industry.  How do you see it developing in the near to medium term?

A Yes, the past year has been very good for fund investors in the Philippine market but that has not always been the case early on. Since unit investment trust funds (UITFs) were introduced in the Philippine market in 2005, they have gone through good as well as bad markets. There was volatility, but we pursued this business as we believed in its potential to address the needs of most Filipinos.

Early on, we focused on making sure funds were sold correctly and that clients understood what they were getting into. We’ve conducted a lot of seminars, prepared materials and sponsored events to educate people on the products they need. As of now, we are reaping the rewards of these educational efforts as the industry has bounced back from a low of P85 billion in December 2008 to P200 billion as of last year-end. BDO has the largest share of UITFs, at 42% of market AUM.

The last few years have been particularly rewarding for BDO fund managers and UITF investors, as the returns they have reaped from their investments were commensurate with the risks they took and the time they remained invested.

The Philippines has one of the lowest savings rates in Asia in terms of putting money aside for retirement. We want to help reverse that by providing products that makes it worth the while of our people to save and invest. The other thing we want to develop is for people to consider investing over a longer-term horizon to maximise their returns.

We show that the performance of our funds have been consistent with the principle of getting higher returns for the higher risk you are taking. We believe the trend of increasing savings and taking a longer-term view of investing will continue moving forward.

 

 

Q What kind of asset classes and products are you focusing on?

A We like to offer products that are in step with market needs. Most Filipinos are risk-averse, and they prefer short-term fixed income placements. Our best seller is therefore the money market fund because the low volatility and higher yield is a good start for people to get into funds.

However, we also get them to realize that going up in the risk spectrum allows you to get better yields that can beat inflation and to participate in the country’s economic performance. That is the reason we have these seminars and educational materials.

The largest chunk of our assets is in money-market (MM) funds, followed by bond funds, then equity funds. But if you look at three- or five-year returns from MM, bond and equity funds, you have been rewarded for taking more risk. Even despite the global financial crisis and volatility of the stock markets, equity has outperformed other classes in the Philippines over six, seven or eight years.

Still, since the crisis the biggest retail flows have been into bond and MM funds – last year, bond funds in particular saw the largest inflows. So while the biggest chunk of AUM is in MM funds, flows are moving more into bond and equity funds now as well, and out of cash. This year, equity funds have seen a strong increase in flows.

 

Q Have you looked at investing outside the Philippines?

A We’re actually looking to diversify our investments now, and move from purely Philippine assets perhaps into Asian bonds and equities – and maybe also global equities. We’ll use external managers to do that to start with, via feeder structures. The regulations for feeder funds and funds of funds were approved last September by the Bangko Sentral ng Pilipinas (BSP) [the central bank], and we expect the release of the Implementing Guidelines this year.

 

Q Can you tell me about your institutional business?

A We manage segregated portfolios; we’re one of the more aggressive managers and have recommended a larger share of equities versus fixed income in past two years. Many institutional clients – such as retirement funds, schools, foundations – are very conservative, so we feel it’s our duty to provide good recommendations and move them to diversify and buy riskier assets, if they can take the volatility.

Also, last year we launched a MM fund that served as an investment alternative for institutional investors who already have existing accounts with us. Fees are charged not on the fund but at the account level. This allows us to tier the fees according to the relationship and not a single fee for all participants. Philippine regulations don’t allow different share classes of the same fund for institutions and retail investors, which is why we had to launch a completely separate offering.

 

Q I understand there’s been a change in the rules on which type of trust accounts can use special deposit accounts. What impact will this have?

A The central bank had, since 2007, allowed retail investors to access special deposit accounts (SDAs) via trust institutions. They are short-term placements that have yielded rates higher than bank deposits and are very popular – with total issuance of P1.9 trillion. Around half the trust industry’s AUM is invested in these SDAs.

But the BSP recently decided it no longer wants to allow access by retail investors into this facility. It sent out a memo on May 17 requiring that by the end of July, all SDA placements be reduced, relative to the outstanding balance as of March 31, by at least 30% on or before July 31 by 100% by the end of 2013.

This will have a major effect. We expect to see bigger flows into MM funds, and probably also bond and equity products. Since the market is more optimistic now, we may see flows into riskier assets.

 

Q Do you invest in alternatives or would you consider doing so?

A Not yet, because the BSP didn’t previously allow us to use derivatives. However, we were the first trust entity to apply for a licence to do so, and we got approval in May to engage in cross-currency swap transactions.

This means we can hedge exposure to foreign currencies, so this opens up investments in overseas assets. If we want to get into other kinds of derivatives, such as equity derivatives, we will have to obtain another licence.

 

Q Draft rules are due to be issued for exchange-traded funds in the Philippines soon. I believe you are planning to launch ETFs?

A We’ve been working on an ETF launch for the past two years, as this was the missing piece in our domestic market. But at the moment, tax rules and other regulations may not yet be conducive to the growth of the industry.

 

Q You are putting a big focus on helping the pensions industry to develop in the Philippines. Can you talk about this?

A Rules on corporate retirement funds have been in place for several decades now, but many companies have not set up pension plans – that’s where we come in to help. Some of them do not want to do it, because they have to separately ring-fence the funds, and therefore can’t use them for other operations.

Still, more companies are looking at this now as an employee incentive; it is a slow process, but it is happening. We have been advocating for them to implement defined-contribution type plans that would allow employee contributions, because this will allow employees to save on their own and make their investment earnings tax exempt at the same time.

We also offer regular investment plans, where people allocate a certain regular payment that can go into any of our funds in the plan. This has proved difficult to sell, but it is getting more traction and is going to snowball as people realise it’s something they need to provide for their retirement.

 

Performances of BDO UITFs versus Benchmarks since Inception as of December 28, 2012*  
BDO UITF
UITF CAGR
Benchmark
Benchmark CAGR
Overperformance/ Underperformance
BDO Peso Money Market Fund 4.71% 91-D Tbill 2.98% 1.73%
BDO Peso Bond Fund 7.11% HSBC 1-3Yr Bond Index 5.77% 1.34%
BDO GS Fund 7.46% HSBC 1-5Yr Bond Index 6.13% 1.33%
BDO Peso Fixed Income Fund 7.75% HSBC 1-5Yr Bond Index 6.23% 1.52%
BDO Peso Balanced Fund 13.80% Ave. of PSEi & 91-D Tbill 10.69% 3.11%
BDO Equity Fund 20.18% PSEi 18.33% 1.85%
 
BDO Dollar Money Market Fund 3.50% Phil. 30-D $ TD 0.63% 2.87%
BDO Dollar Bond Fund 5.85% 1-3 Yr ROP Index 5.80% 0.05%
BDO Medium Term Dollar Bond Fund 7.35% 3-5 Yr ROP Index 7.15% 0.20%

Yields as of December 28, 2012 are CAGRs since inception of the funds (2003 for the BDO Peso Balanced Fund and 2005 for the rest of the funds).
Historical performances presented above are purely for reference purposes only and not guarantees of similar future returns.