Industry Assets
by. HANNAH M. MURALLA, Special Features Assistant Editor
To quote a young trader in Oliver Stone’s new “Wall Street” flick, “If it weren't for people who took risks, where would we be in this world?”
Not everyone is willing to make a gamble, especially not in the financial ring, which only recently suffered from the global credit crunch. But the market’s inherent risks can be controlled, as shown by local fund managers who’ve managed to dodge the bear’s debilitating effects.
The Philippine asset management industry remained largely isolated from the global meltdown, thanks to widespread conservatism carried from the 1997 Asian financial crisis. “We’ve been quite cautious in the way we deal with the business. There were, of course, some ripples but not on the asset management sector...banks’ exposure have been relatively small compared to the size of the whole industry,” explained Rafael Ayuste, Jr., first senior vice president and trust officer of the PNB Trust Banking Group.
“Investments were focused primarily in local assets and there was little exposure, if any, to the US subprime sector,” added Michael Ferrer, managing director of ATR KimEng Asset Management. Although the assets under management of the mutual fund and unit investment trust fund (UITF) industries fell by 36% in 2008, Mr. Ferrer noted that no Philippine fund had to suspend redemptions due to lack of liquidity.
Understanding risks
Local fund managers, however, still had to reassure clients of their investments’ status. Maria Theresa Marcial-Javier, senior vice president of the BPI Asset Management and Trust Group (AMTG), recalled how the bank had to explain what was then transpiring in the financial markets and what its implications were on the global economy. “The first order of the day was to communicate how their investments were performing and that these remained safe,” she said.
These talks seemed to have worked. Ador Abrogena, executive vice president of BDO Trust and Investments Group, says that this time, clients kept still. Back in 2006, during the so-called UITF crisis, investors pulled their money out as soon as the market went down.
“Now it’s a totally different behavior; people were even placing more money as the market plunged. So when it went up, they were cashing in. We’re glad because they now know that the opportunity to make money is when the market is down,” Mr. Abrogena shared.
“Investors in general have also become more conscious of structures and the risks they’re taking. They have paid more attention to leverage levels and liquidity,” added Ms. Javier.
Take it on trust
But in the wake of the downturn, it’s not only their money that investors are tracking. According to professional services organization Ernst&Young, “the public is keeping a much closer and more skeptical eye on the financial services industry as a whole, and more particularly, on trust managers. Institutional investors are watching much more warily than was once the case.”
But if the results of a survey by financial services group ING are any indication, it appears that local fund managers still have their clients’ confidence, despite the persistent pessimism in the US economy. The quarterly poll found Philippine-based investors among the most upbeat in Southeast Asia, scoring 157 on the ING Investor Dashboard Survey, the fifth consecutive period that the Philippine index is in the black. Fifty seven percent of the 321 respondents believe the local economy improved in the third quarter, 60% are confident that the stock exchange will rise in the next quarter, and 77% think returns on their investment would increase.
“The Philippines, along with many emerging market economies, is becoming more resilient to external developments. Record-high overseas Filipino workers remittances and the strengthening of the peso against the US dollar have made a strong case for consumption-driven growth,” ING said.
Despite these bright signs, Mr. Ferrer noted that investors should expect lower dividends due to slow global growth and very low interest rates. The biggest challenge for today’s fund managers, he said, is how to deliver good returns while managing risks closely. “But there are always opportunities, such as new asset classes like commodities and currencies,” he said.
Mr. Abrogena shares this sentiment, noting how pre-crisis growth levels are becoming clearer on the Asian front. “Emerging Asia is the favorite [of investors] because all the other regions are not expected to grow as much anymore. The US and Europe’s populations are not increasing, they’re drawing on their savings while Asia has a younger population and a lot of economic activity going on to support the growth and the emerging economic power of the middle class,” he noted.
Amid shifting market conditions, Ernst&Young suggests that asset managers capitalize on new opportunities offered by communications and information technology. PNB’s Mr. Ayuste agrees, saying that the local sector has not been able to push technology to serve its clients better.
BPI appears to be making a head start: Mario Miranda, AMTG vice president for wealth management, earlier said that the bank is looking at allowing clients to access their investment accounts on the Web, a more convenient method than having them go to a bank branch for the same task.
Source: http://www.bworldonline.com/main/content.php?id=20164
by. HANNAH M. MURALLA, Special Features Assistant Editor
To quote a young trader in Oliver Stone’s new “Wall Street” flick, “If it weren't for people who took risks, where would we be in this world?”
Not everyone is willing to make a gamble, especially not in the financial ring, which only recently suffered from the global credit crunch. But the market’s inherent risks can be controlled, as shown by local fund managers who’ve managed to dodge the bear’s debilitating effects.
The Philippine asset management industry remained largely isolated from the global meltdown, thanks to widespread conservatism carried from the 1997 Asian financial crisis. “We’ve been quite cautious in the way we deal with the business. There were, of course, some ripples but not on the asset management sector...banks’ exposure have been relatively small compared to the size of the whole industry,” explained Rafael Ayuste, Jr., first senior vice president and trust officer of the PNB Trust Banking Group.
“Investments were focused primarily in local assets and there was little exposure, if any, to the US subprime sector,” added Michael Ferrer, managing director of ATR KimEng Asset Management. Although the assets under management of the mutual fund and unit investment trust fund (UITF) industries fell by 36% in 2008, Mr. Ferrer noted that no Philippine fund had to suspend redemptions due to lack of liquidity.
Understanding risks
Local fund managers, however, still had to reassure clients of their investments’ status. Maria Theresa Marcial-Javier, senior vice president of the BPI Asset Management and Trust Group (AMTG), recalled how the bank had to explain what was then transpiring in the financial markets and what its implications were on the global economy. “The first order of the day was to communicate how their investments were performing and that these remained safe,” she said.
These talks seemed to have worked. Ador Abrogena, executive vice president of BDO Trust and Investments Group, says that this time, clients kept still. Back in 2006, during the so-called UITF crisis, investors pulled their money out as soon as the market went down.
“Now it’s a totally different behavior; people were even placing more money as the market plunged. So when it went up, they were cashing in. We’re glad because they now know that the opportunity to make money is when the market is down,” Mr. Abrogena shared.
“Investors in general have also become more conscious of structures and the risks they’re taking. They have paid more attention to leverage levels and liquidity,” added Ms. Javier.
Take it on trust
But in the wake of the downturn, it’s not only their money that investors are tracking. According to professional services organization Ernst&Young, “the public is keeping a much closer and more skeptical eye on the financial services industry as a whole, and more particularly, on trust managers. Institutional investors are watching much more warily than was once the case.”
But if the results of a survey by financial services group ING are any indication, it appears that local fund managers still have their clients’ confidence, despite the persistent pessimism in the US economy. The quarterly poll found Philippine-based investors among the most upbeat in Southeast Asia, scoring 157 on the ING Investor Dashboard Survey, the fifth consecutive period that the Philippine index is in the black. Fifty seven percent of the 321 respondents believe the local economy improved in the third quarter, 60% are confident that the stock exchange will rise in the next quarter, and 77% think returns on their investment would increase.
“The Philippines, along with many emerging market economies, is becoming more resilient to external developments. Record-high overseas Filipino workers remittances and the strengthening of the peso against the US dollar have made a strong case for consumption-driven growth,” ING said.
Despite these bright signs, Mr. Ferrer noted that investors should expect lower dividends due to slow global growth and very low interest rates. The biggest challenge for today’s fund managers, he said, is how to deliver good returns while managing risks closely. “But there are always opportunities, such as new asset classes like commodities and currencies,” he said.
Mr. Abrogena shares this sentiment, noting how pre-crisis growth levels are becoming clearer on the Asian front. “Emerging Asia is the favorite [of investors] because all the other regions are not expected to grow as much anymore. The US and Europe’s populations are not increasing, they’re drawing on their savings while Asia has a younger population and a lot of economic activity going on to support the growth and the emerging economic power of the middle class,” he noted.
Amid shifting market conditions, Ernst&Young suggests that asset managers capitalize on new opportunities offered by communications and information technology. PNB’s Mr. Ayuste agrees, saying that the local sector has not been able to push technology to serve its clients better.
BPI appears to be making a head start: Mario Miranda, AMTG vice president for wealth management, earlier said that the bank is looking at allowing clients to access their investment accounts on the Web, a more convenient method than having them go to a bank branch for the same task.
Source: http://www.bworldonline.com/main/content.php?id=20164
