Thursday, December 20, 2012

Philequity and BPI's Stock Index Funds: An Objective Comparison

Thanks to the person who made this comment for inspiring this post (unfortunately, it has already been removed by the poster):

There is a passive fund in the Philippines -- its called PHILEQUITY PSE INDEX FUND (Bloomberg Ticker PHILPSE:PM). Unlike the actively managed fund, the starting investment is P 50,000. This fund is not actively traded.

First let me clarify that currently no fund in the Philippines is traded--actively or not. Mutual funds and UITFs are not traded, and investment shares or units may only be sold/redeemed through the fund provider. But that's a story for another day.

Before seeing this comment in my inbox, the only stock index (i.e., PSEi) fund in the Philippines that I was aware of was BPI's Philippine Stock Index Fund. But even if I'm biased for passive investing, as some of you may know, I avoided talking about that fund too much because I thought the minimum investment requirement was too high and the management fee too steep. So maybe you can imagine my *excitement* upon finding out that another index fund was available in the country.

After only a few minutes of cursory online digging, I've uncovered some VERY interesting information about which I can only say... WOW (non-judgmentally, but maybe a wee-bit sarcastically).

As a result, I've come up with a 100% (best effort) objective comparison between Philequity's PSE Index Fund (Bloomberg Ticker PHILPSE:PM) and BPI's Philippine Stock Index Fund (Bloomberg Ticker BPIPHID:PM).

All the information below can be found on Bloomberg; try clicking on the above links or refer to this guide that I posted a while ago.

Minimum and Additional Investment Requirement

Minimum Investment
Minimum Subsequent Investment



Current management fee is the percentage of the investment value deducted annually for management and administrative expenses.

Front load is the percentage of the investment amount deducted at the beginning of the investment period. If you invest 100,000 pesos in a fund with a front load of 5%, you will only receive 95,000 pesos worth of units/shares.

Back load is the percentage of the investment value deducted at redemption.

Both the front load and back load fees are supposed to go to the fund agents, brokers, and salespersons.

Redemption fee is the percentage of the investment value deducted when units/shares are redeemed before a predetermined minimum holding period.

Performance vs. the PSEi (PCOMP:IND)

In the past (1) year, BPI has slightly outperformed the PSEi.
In the same period, Philequity has underperformed the PSEi.

In the past 3 years, both BPI and Philequity have closely tracked the PSEi
without any discernible difference in performance.

In the past 5 years, Philequity has significantly outperformed both BPI and the PSEi
Given the following information, which of the two funds above is more attractive to you?


I'm sorry, I know I promised to be objective in this post, but I hope you would allow me this one insinuation.

Looking at the Philequity webpage for its index fund, we see the following comparison against the PSEi.

For the life of me, no matter how I look at the data, I just can't reconcile this implied discrepancy in performance between the Philequity index fund and the PSEi, and the Bloomberg comparisons that we saw earlier. Something's amiss, most definitely. And whatever it is, at worst it is irresponsible, unethical, and unconscionable.

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