With its takeover of ING Investment Management’s Philippine arm – which completed on March 30 – Manila-based BPI Asset Management may have overtaken BDO Asset Management as the country's biggest fund house and expects to see particularly fast growth in its retail business.
As of December 31, BDO had 570 billion pesos ($13.2 billion) in assets under management, while the combined assets of BPI AM and ING IM stood at Ps564 billion. Yet BPI AM had a good start to 2011 and surpassed Ps600 billion in AUM as of March 31, says Maria Theresa Marcial-Javier, who has headed the group since September 2009.
Asked about post-merger plans and strategy, she said: “Right now our priority is to be able to integrate [the businesses] in a seamless fashion, and to make it as smooth a transition as possible for clients, particularly for customers of ING. Existing customers of BPI Asset Management won’t need to make any adjustments.”
The ING IM investment team joined entirely intact, with not a single portfolio manager or analyst departing, adds Marcial-Javier. In fact, 38 of the 40 ING IM staff will remain with BPI, with only two operations staff moving on.
Moreover, ING IM’s investment funds in the Philippines have been rebranded as ‘Odyssey Funds’ to differentiate between the investment philosophies of the former ING products and BPI AM’s funds.
“ING Odyssey funds cater to more sophisticated customers who better understand risk taking,” says Marcial-Javier, adding that they are active, alpha-seeking funds. More than half the Odyssey products are equity-based, such as the flagship Odyssey Philippines Equity Fund.
BPI AM’s existing fund portfolio is largely fixed-income-based, the ratio being 80% fixed income to 20% equity.
As for the client breakdown, Ps320 billion of the AUM is institutional and Ps214 billion represents wealth-management assets, as of the end of January. That is a 60% institutional to 40% retail breakdown, which is likely to remain the same following the merger, says Marcial-Javier, although the numbers are still being finalised.
Yet she sees the biggest potential business growth coming from the retail side, and other domestic fund managers agree, including BDO. “The entire [funds] industry is recognising the growth momentum in the retail space,” says Marcial-Javier. “People are jumping on the bandwagon in terms of pushing more products onto the market.”
She cites two major drivers behind the expected growth in retail funds. Firstly, BPI AM (and other firms) reduced the minimum investment threshold for buying funds from Ps50,000 pesos to Ps10,000 pesos in the fourth quarter of 2010.
In addition, the firm has initiated an electronic trading drive to encourage more retail customers to start buying investment funds. In June, it started offering customers the ability to view transactions and outstanding positions, and this month will launch a trading platform for buying and selling funds online.
However, a lot of education is required, says Marcial-Javier: “There’s a big gap between what investors know and what they should know.”
As a result, there is an increasing focus on wealth management; she says BPI AM differentiates itself from other banks in that it has relationship managers for wealth-management accounts in its branches.
As for other parts of the market, the Securities and Exchange Commission has plans to put in place rules for onshore listing of exchange-traded funds, but movement has been “a bit slow” on that front, says Marcial-Javier. The SEC still has to form a regulatory framework for ETFs, which is a while off yet – next year at the earliest, she suggests.
On December 8, BPI signed an agreement to buy ING Bank Manila's trust business. On February 16, BPI and ING received approval for the transaction from the Bangko Sentral ng Pilipinas, subject to certain conditions. The employees of ING Bank Manila's trust department will be absorbed as a separate division under BPI AM.
This move brings the firm's total number of employees to 222. With the acquisition, BPI AM becomes the manager, adviser and administrator of a total of 32 investment funds and has a funds market share of around 46% of the unit investment trust funds market and 44.5% of the mutual funds market as of the end of 2010.
BPI, which is celebrating its 160th anniversary this year, is the Philippines’ largest bank both by market capitalisation and branch network.