THE Bangko Sentral ng Pilipinas (BSP) is optimistic the local fund-management industry, already as large as P4 trillion and encouraged by the country’s strong macroeconomic underpinnings, will continue to expand.
At the Fund Managers Association of the Philippines (FMAP) awards night on Thursday at the Lepanto building in Makati, BSP Governor Amando M. Tetangco Jr. said the assets under management from the industry should continue to grow in the coming years. This development, he said, will help boost confidence in the domestic financial markets.
“The BSP expects these numbers to continue to grow moving forward. The Philippines’s strong economic growth, the stable inflation environment, robust external position and the sound banking system to further boost the markets confidence in our domestic financial markets,” Tetangco said in his speech.
As of end-March this year, the BSP said asset under management by trust institutions totaling P2.7 billion. But FMAP said if all asset-management companies were included, the aggregate should total around P4 trillion.
“If we count only the trust institutions that we call to the BSP, asset under management as of end-March 2016 stood at P2.7 billion. FMAP estimates that if other asset-management companies are included, this figure will grow to almost P4 trillion, covering 174 peso-denominated fixed-income and equity funds, and 52 foreign-currency denominated funds,” he said.
According to Tetangco, the fund-management industry must evolve with its constituents, since investors are now becoming selective in terms of trying newer products to meet their needs.
He emphasized two issues banking practitioners must take into consideration, including financial consumer protection and asset management business, which has credit implications.
On financial consumer protection, Tetangco noted how investors were unprepared for the market reversal during the global financial crisis in 2008. He said both the agent and investor must be well educated in terms of the changing nature of financial markets.
“In many cases, these investors were enticed by the returns promised by agents without necessarily understanding the risks that they had taken. The clients must also be empowered, so they would better define their guidance and how their financial resources can be optimized to meet their needs,” he explained.
On the credit implications of the asset management business, he asked bank practitioners to consider the two types of agency agreements on funds, which are maybe actively managed funds and
passive funds.
“These notions are confirmed by empirical work at the BIS [Bank of International Settlements] or the macroeconomic segments, among others. They have shown that asset managers here in the asset markets tend to behave in a correlated manner and that investment proves to asset managers and asset prices amplify each other’s campaign,” he said.
He encouraged FMAP and its members to not be oblivious to issues pertaining to financial-stability, and encouraged market practitioners to uphold so-called industry standards.
“This is why my second message for the industry is this: Do not be oblivious to financial-stability issues. We live in an industry where change is literally a minute-by-minute phenomenon not only in financial rates and practices, but also in market sentiment. We can look toward regulation to manage market conduct within acceptable cause but, in the end, we depend on the market practitioners with the need to be fully committed in upholding these standards,” he said.
FMAP was established in April 1997. It is an organization composed of local-equity and fixed-income fund managers. Its goal is to provide professional fund management, adhering to ethical standards and recognized practices globally that will help uplift the investing public.