Opening asset management in the Philippines

Big banks managing bond funds are the rule. New entrants, new products and a new pension system have the potential to galvanise this sleepy industry.

This article originally appeared in full in the October 2009 edition of AsianInvestor magazine. For magazine subscriptions, please contact Stephen Tang at +852 2122 5239 or at [email protected].

The Philippines' asset management and trust industry is dominated by just three players, Banco De Oro, Bank of the Philippine Islands, and Metropolitan Bank & Trust. This trio accounts for around 60% of assets under management (AUM). At least 30 other market players are trying to hang on to the leftovers.

Just as it is the case in most Asian fund markets, distribution is the key to success in the Philippines.

"Our natural strength is our distribution network. We are very close to the ground and we have very good synergies with our branch group," says Theresa Marcial Javier, group head of Bank of the Philippine Islands (BPI) Asset Management and Trust Group, the largest fund management firm in the country in terms of assets.

As of the end of July, BPI Asset Management had around Ps416 billion ($8.6 billion) in assets under management (AUM), a 29% increase from Ps322 billion ($6.6 billion) in end-2008. The firm has a market share of around 22% in an industry with around 40 players.

The number one player in the marker, Banco De Oro, has a market share of around 25%. Metropolitan Bank has a market share of around 12%.

Javier is targeting an AUM growth of 10-15% annually in the next two years, largely through BPI's retail and wealth management business. The firm has an even mix of institutional versus retail/wealth management businesses, but BPI intends to grow the latter to 60-65% of its assets over the next three years.

"We expect tremendous opportunity in the retail and wealth management space, and we shall capitalise on the strength of BPI's over-800-strong distribution network of branches all over the country," says Javier, who is also the president of the Fund Managers Association of the Philippines (FMAP).

This ambition reflects the trend that Javier sees in Asia, where the number of mass-affluent individuals is on the rise, and plays to the strength of a bank with a national branch network.

An additional advantage is access to remittances from overseas Filipino workers, who in aggregate send back over $1 billion a month, or more than 10% of the country's GDP. The stability of these flows have helped maintain stability in the Philippines throughout the global financial crisis.

BPI is a major player in the remittance space. This has yet to translate into managing assets via funds or trusts, but the bank sees potential.

"Right now, the number of overseas Filipino workers investing in funds in still very small, but the potential is there," Javier says. "I believe this will happen in stages. They are addressing their needs first and are buying houses, cars, paying for their children's education. But as they become more affluent, they will most likely be looking at the next stage, which will be investments."

Room for new entrants

How do smaller bank affiliates and independent mutual fund houses compete head-on with the likes of BPI Asset Management? At the moment, they don't.

The full article is available in the October 2009 edition of AsianInvestor magazine. Please contact Stephen Tang on +852 2122 5239 for details.

¬ Haymarket Media Limited. All rights reserved.