FUND MANAGER First Metro Asset Management, Inc. (FAMI) has launched a new mutual fund that gives passive investors a benchmark that captures the consumption-led growth of the Philippine economy.
The First Metro Consumer Fund tracks the performance of the First Metro Index on MSCI Philippines, FAMI President Augusto M. Cosio, Jr. said during the launch on Wednesday. The index was developed in partnership with globally renowned index provider MSCI, Inc. and rolled out in 2017.
The First Metro Consumer Fund provides investors who do not want to actively manage their investment a tool that can benefit from the historical out-performance of the stocks banking on the robust Filipino household expenditure pattern.
Consumer spending is the major driver of the Philippine economy, accounting for about two-thirds of gross domestic product.
“Given the demographic structure of our economy, we do not just expect — we anticipate — further growth in private consumption expenditure as a driver of the Philippine economic growth,” Mr. Cosio said.
The First Metro Consumer Fund is invested in a basket of securities comprising the First Metro Index, which is made up of 21 stocks carved out from the MSCI Philippines’ 42 equity universe that comprise 99% of the Philippine stock market’s free-float adjusted market capitalization.
Even with the volatility in the stock market, this is the best time to invest in the new mutual fund offering an assortment of high PE stocks comprised of Philippine Stock Exchange index (PSEi)-member and alpha securities, First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said.
“(The consumer fund) capitalizes on the longer trend in the market… For a manager to consistently beat the market by timing it is very difficult. Rather than market timing, it is about being invested in the longer term,” said Rajarshi Sen, vice president for MSCI Index coverage for Philippines.
Apart from the broad exposure to industries that sell goods and services that are consumed everyday by an average Filipino, the composition of the consumer fund is anchored on the MSCI screening process based on market capitalization, liquidity, foreign inclusion and foreign room limit.
The back-tested performance of the stock composition of the consumer index over the last 10 years indicates a 454% straight-line return, significantly higher than the 296% gain of the Philippine Stock Exchange index and 119% return of MSCI IMI.
In terms of price performance, the First Metro Index registered a 27.5% increase last year compared to 25.11% of the PSEi and 11.4% of MSCI EPHE.
Mr. Cosio expects consumption to stay robust as the economy reaps the windfall from a demographic dividend with high disposable income. The implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law will also put more money in the pockets of salaried workers, further increasing the spending power of the Filipino consumers.
FAMI and FMIC are the companies behind innovative financial and investment products. They pioneered the First Metro Exchange Traded Fund, the first ever, passively-managed ETF in the country.
“Today marks the day that the First Metro group will shift its attention to the equity market,” FMIC Chairman Francisco C. Sebastian said. — Krista Angela M. Montealegre