May 19, 2024

Investing In Top Philippine Money Market Funds – Peso Lab

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Little is known about investing in money market funds in the Philippines. Unlike equities and index funds, most Pinoys are not familiar with the sort of assets that money market funds acquire.

Maybe because it’s sort of on the conservative side and its returns are modest at best.

In this article, I’m going to talk about what they are and how you can earn from them. Read on and learn more about why they are considered less risky and provide passive income for short-term financial goals.

Money market

Money market

Before we talk about these investment funds, let’s talk about what money market is.

Money market is a place where banks and institutions can buy or sell short-term debt instruments, with maturity that lasts overnight to a year. It is a means for big companies and financial institutions like banks and investment corporations to borrow capital quickly.

In the Philippines, examples of debt instruments are:

Because they are debt instruments, they are interest-bearing. Acquiring them would you to earn interest, which is paid at a periodic interval. That’s why they’re also collectively considered as fixed income securities. Not only that, they can be traded and they usually mature within a year.

What is money market fund?

money market fund

Debt instruments are bought and sold (traded) in wholesale. Money market funds are created to be sold in retail to the investing public. This means that instead of you having to personally buy and own these securities, you let the fund manager to do it on your behalf.

Here is an example portfolio of a money market fund portfolio.

As you can see, the portfolio has the following: bank time depositsLTNCDs (long term negotiable certificate of deposit)government bondscorporate issuestreasury bills, and cash.

List of Philippine companies offering money market funds

They are offered by the following companies:

Why is money market fund considered less risky than others?

Again, it is crucial to always have a thought that risks cannot be eliminated entirely, but it is also valid to consider that not all risks are created equal.

Money market tends to be regarded as the least risky compared to bonds and stocks. This is because of the short maturity. Risk is reduced because there is a shorter length of time that these debts are expected to be paid.

Compare that to the very volatile nature of stocks where prices can go up and down real-time. Bonds may have comparatively less risks than stocks, but such risks may increase the longer the bonds mature.

Plus, these securities are issued either by the government or corporations rated according to their credit-worthiness.

Advantages of money market funds in the Philippines

Advantages of money market funds in the Philippines

Here are the pros and benefits of investing in money market funds.

Liquid

They are managed in a way that allow you to get in and out. When you want to redeem your investment, companies offering UITFmutual fundsPERA or VUL are regulated to buy back your holdings so that you can get your money back.

Park your money

Investors may also park their money during downtime in capital market. Because the risk of capital loss is minimal (although not entirely absent), they can wait out until the market picks up momentum again.

And for the time being that they are parked, they get to enjoy moderate gains in a low-risk investment.

Rate hike shield

They can also protect from rate hikes. You see, bonds behave opposite to the change in interest rates that are announced by the BSP. If the rate is increased, the return of bonds falls. If the rate is decreased, bonds rise in value.

Money market securities are usually unaffected to rate hikes.

Disadvantages of Philippine money market funds

Disadvantages

Not insured

Whenever you invest, your money is not insured unlike LTCDsavings account or time deposit. While experts believe that capital loss is minimal, the global financial crisis in 2008 brought a new light into this belief as those debts backed by mortgages were impacted negatively.

Non-guaranteed returns

The returns that you get are also non-guaranteed. Also, they fluctuate from time to time. The kind of income that you get then can vary and be unpredictable.

Opportunity cost

Because of the moderate returns, there might be an opportunity cost if you invest long term. Stocks for the past 10 years have posted double-digit growth. The same cannot be said for money market funds.

Inflation

Another thing to consider is inflation. Inflation describes the rise of prices of goods and services. If your returns do not match or exceed inflation, then you may be losing the value of your money over time.

Fees

Perhaps the biggest drawback is that the fees might eat into whatever gains you get. Bear in mind that the returns are modest at best, and if you take the fees into account you might be at the losing end.

Features of a money market fund

Features of a money market fund

Just like any other pooled, managed funds have the following features:

  • Initial capital.
  • Additional investment
  • Sales load
  • Management fee
  • Holding period
  • Exit fee

Initial capital

The initial capital is the minimum investment that is required when you open the fund. It ranges between P25 and P1 million. Check the table below for the details or you can contact the company directly to get more information.

Additional investment

The additional investment is the least amount required when you want to add more to your investment. It can be anywhere from P25 to at least P100,000 depending on the fund.

Sales load

Sales load is a portion of your investment that goes to the fund. It’s a charge that is paid every time that you put money in. There are many reasons a fund may charge a sales load, one of which is as a compensation to the licensed agent who assisted you.

Management fee

Management fee goes to pay the operation and management of the fund. It ranges between 0.05% to 1%.

Holding period

The holding period is the least period of time you’re expected to keep your investment in the fund. Getting your money back earlier than that would cause you to be charged for the exit fee.

Exit fee

Exit fee is assessed when you redeem your investment before the holding period ends.

Fees and charges of money market funds

NAME TYPE INITIAL ADD SALES LOAD FEE HOLD EXIT
ALFM Money Market Fund, Inc. Mutual funds 5,000 1,000 5% 0.50% 7 days 1%
First Metro Save and Learn Money Market Fund, Inc. Mutual funds 5,000 1,000 None 0.50% 7 days 1%
Philam Managed Income Fund, Inc. Mutual funds ? ? ? ? ? ?
Sun Life Prosperity Dollar Starter Fund, Inc. Mutual funds $500 $100 None 0.25% 7 days 0.25%
Sun Life Prosperity Money Market Fund, Inc. Mutual funds 100 100 None 0.25% 7 days 0.25%
BDO PERA SHORT TERM FUND  PERA 1,000 1,000 0.50% 30 calendar 0.50%
BPI PERA Money Market Fund PERA 1,000 1,000 0.50% None None
Landbank PERA Money Market Fund PERA 5,000 1,000 1% 30 calendar days 25% on net earnings or 500, whichever is higher
AB CAPITAL SHORT-TERM FUND UITF 50,000 25,000 0.375% p.a. 0 calendar NONE
Security Bank Peso Money Market Fund UITF 10,000 1,000 0.30% per annum based on the Net Asset Value (NAV) 30 calendar 0.5% of amount redeemed
ATRAM Peso Money Market Fund UITF 50 50 0.50% p.a. 0 banking None
Bank of Commerce DIVERSITY MONEY MARKET FUND UITF 10,000 5,000 0.25% p.a. 30 calendar 5% of the redeemed amount
BDO INSTITUTIONAL CASH RESERVE FUND UITF 0 0 None 0 calendar None
BDO PESO MONEY MARKET FUND UITF 10,000 10,000 0.50% p.a. 0 calendar None
BDO SHORT TERM FUND UITF 10,000 10,000 0.50% p.a.  30 calendar 0.50% of the Original Participation Amount 
BPI Short Term Fund UITF 10,000 1,000 0.25% p.a. 0 calendar None
BPI Money Market Fund UITF 10,000 1,000 0.50% p.a. 0 calendar None
CHINA BANK MONEY MARKET FUND UITF 5,000 1,000 0.25% p.a. 0 calendar None
CHINA BANK CASH FUND (formerly CBC INSTITUTIONAL MMF) UITF 5,000 1,000 0.25% per annum based on the Net Asset Value (NAV) of the Fund before trust fee for the day 3 banking 1.0% of the amount redeemed
CHINA BANK SHORT-TERM FUND UITF 5,000 1,000 0.15%p.a. based on the Net Asset Value (NAV) of the Fund before trust fee for the day 3 banking 1.0% of the amount redeemed
CTBC Money Market Fund UITF 10,000 10,000 0.25% per annum based on the Net Asset Value (ANV) of the Fund before trust fee for the day 3 banking 1.0% of the amount redeemed
Development Bank of the Philippines UNLAD KAWANI MONEY MARKET FUND UITF 25 25 0.25% 30 calendar 0.50%
Development Bank of the Philippines CLASS I – UNLAD PANIMULA MM FUND UITF 1,000,000 100,000 0.05% p.a. 0 calendar None
Development Bank of the Philippines CLASS II – UNLAD PANIMULA MM FUND UITF 100,000 10,000 .15% p.a.  0 calendar None
Development Bank of the Philippines CLASS III – UNLAD PANIMULA MM FUND UITF 10,000 1,000 .25% p.a.  0 calendar None
EastWest Peso Money Market Fund UITF 10,000 1,000 .30% p.a. 0 calendar None
East West Peso Short Term Fund UITF 10,000 1,000 0.25% p.a. of the market value of the fund 0 calendar None
LANDBANK Money Market Fund UITF 5,000 1,000 0.25% p.a of the market value of the fund 0 calendar Not applicable
LANDBANK Money Market Plus Fund UITF 5,000 1,000 0.20% 7 calendar 25% of net earnings (P500 minimum)
Maybank Tiger Peso Money Market Feeder Fund UITF 10,000 1,000 0.50% 30 calendar 25% of net earnings (P500 minimum)
Metro Money Market Fund UITF 50,000 25,000 0.25% p.a.  7 banking 0.25% of redemption proceeds
Metro Short Term Fund UITF 25,000 10,000 0.60% p.a. based on Net Asset Value (NAV) 7 calendar 50% of income on redeemed amount
PBCOM Money Market Fund UITF 10,000 10,000 0.60% p.a. based on Net Asset Value (NAV) 7 calendar 50% of income on redeemed amount
PNB PRIME PESO MONEY MARKET FUND UITF 10,000 10,000 0.5% p.a.  30 calendar 0.125% of redemption value
PNB GLOBAL FILIPINO PESO MONEY MARKET FUND UITF 5,000 5,000 0.50% p.a. 5 banking 50% of Income Earned
PNB DREAM BUILDER MONEY MARKET FUND UITF 2,000 2,000 0.50% p.a. 5 banking 50% of Income Earned
PNB INSTITUTIONAL MONEY MARKET FUND UITF 10,000 1,000,000 0.5% p.a. of fund value 30 calendar 50% of Income Earned
PNB PESO FIXED INCOME FUND UITF 10,000 10,000 0.125% p.a. of Fund Value 3 banking 50% of Income Earned
PSBANK MONEY MARKET FUND UITF 10,000 5,000 0.5% p.a. of fund value 5 banking 50% of income earned
RIZAL PESO MONEY MARKET UITF 5,000 1,000 0.50% p.a. based on Net Asset Value (NAV) 30 calendar 1.00% for 1-15 days and 0.50% for 16-30 days of Redemption proceeds for all subscriptions held for less than thirty (30) days
RCBC PESO SHORT TERM FUND UITF 5,000 1,000 0.50% based on NAV 0 calendar None
RIZAL PESO CASH MANAGEMENT FUND UITF 1,000,000 100,000 0.25% per annum 0 calendar None
Robinson Bank Peso Money Market Fund UITF 100,000 10,000 0.25% based on NAV 0 calendar None
SB PESO MONEY MARKET FUND UITF 10,000 5,000 0.25% per annum 14 calendar 1-3 days 100% of interest earned ; 4 < 14 days 50% of interest earned
Sterling Money Market Fund UITF 10,000 5,000 0.35% p.a. 0 calendar N/A
UnionBank Peso Short Term Fixed Income Portfolio UITF 0 0 1.00% p.a. 30 calendar 0.50% of the net proceeds
UCPB Cash Management Fund (Formerly United Cash Management Fund) UITF 1,000 1,000 1% per annum; 0.34% for the quarter 90 calendar Not applicable; Service Fee of Php100 per withdrawal

Best money market funds in the Philippines

See below the list of top money market fund performance for the year 2019. For more complete list, visit best UITF and top mutual funds articles. As a reminder, past results do not guarantee future returns.

Thus, the best money market fund is UnionBank Long Term Fixed Income Portfolio. It is followed by UnionBank Tax Exempt Portfolio, Security Bank PESO BOND FUND, ABF Philippines Bond Index Fund and BPI Fixed Income Portfolio Fund-of-Funds.

How to interpret the data?

Imagine that you put in ₱100,000 at the start of the year. By the end of the year, if you invested in UnionBank Long Term Fixed Income Portfolio, your money would now be worth ₱122,120 because that fund grew by 22.12%.

TYPE BANK FUND NAME ROI
UITF Union Bank UnionBank Long Term Fixed Income Portfolio 22.12%
UITF Union Bank UnionBank Tax Exempt Portfolio 19.82%
UITF Security Bank SB PESO BOND FUND 19.29%
UITF BPI ABF Philippines Bond Index Fund 18.67%
UITF BPI BPI Fixed Income Portfolio Fund-of-Funds 17.61%
UITF China Bank CHINA BANK FIXED INCOME FUND (formerly CBC GS FUND) 17.13%
UITF BPI Odyssey Peso Bond Fund 16.96%
UITF EastWest EastWest Peso Long Term Bond Fund 15.66%
UITF Manulife Manulife Income Builder Fund (Class I) 15.51%
UITF Union Bank UnionBank Philippine Peso Fixed Income Portfolio 15.16%
UITF Manulife Manulife Income Builder Fund (Class A) 13.81%
UITF RCBC RIZAL PESO BOND FUND 13.08%
UITF Union Bank UnionBank High Net Worth Intermediate-Term Peso Fixed Income Portfolio 12.90%
UITF BDO BDO MERIT FUND MEDIUM TERM PORTFOLIO 12.90%
UITF Atram ATRAM Total Return Peso Bond Fund 12.54%
UITF Asia United Bank Peso Investment Trust Fund 11.86%
Mutual fund Philam Philam Bond Fund, Inc. 11.54%
UITF UCPB UCPB Peso Bond Fund (Formerly United Conservative Fund) 11.46%
UITF BDO BDO PESO BOND FUND 11.35%
UITF BDO BDO PERA BOND INDEX FUND 11.35%
UITF BDO BDO GS FUND 11.35%
UITF BDO BDO MERIT FUND INTERMEDIATE TERM PORTFOLIO 11.35%
UITF BPI Odyssey Peso Medium Term Bond Fund 11.35%
UITF BPI BPI Premium Bond Fund 11.35%
UITF China Bank CHINA BANK INTERMEDIATE FIXED-INCOME FUND 11.35%
UITF EastWest EastWest Peso Intermediate Term Bond Fund 11.35%
UITF Land Bank LANDBANK Bond Fund 11.35%
UITF Manulife Manulife Stable Income Fund (Class I) 11.35%
UITF Manulife Manulife Stable Income Fund (Class A) 11.35%
UITF Manulife Manulife Asia Dynamic Bond Feeder Fund (PHP Unhedged Class A) 11.35%
UITF Maybank Maybank Tiger Peso Bond Feeder Fund 11.35%
UITF Metrobank Metro Corporate Bond Fund 11.35%
UITF Metrobank Metro Max-5 Bond Fund 11.35%
UITF Metrobank Metro Aspire Bond Feeder Fund 11.35%
UITF Metrobank Metro Max-3 Bond Fund 11.35%
UITF Metrobank Metro Unit Paying Fund 11.35%
UITF Philippine Business Bank Diamond Fund 11.35%
UITF PNB PNB PESO INTERMEDIATE TERM BOND FUND (formerly AUP GS FUND) 11.35%
UITF Union Bank UnionBank Intermediate Term Fixed Income Portfolio 11.35%
UITF Union Bank UnionBank Infinity Prime Portfolio 11.35%
Mutual fund Sun Life Sun Life of Canada Prosperity Bond Fund, Inc. 11.20%
Mutual fund Sun Life Sun Life Prosperity GS Fund, Inc. 10.47%
Mutual fund Soldivo Soldivo Bond Fund, Inc. 8.03%
Mutual fund Philequity Philequity Peso Bond Fund, Inc. 7.71%
Mutual fund FAMI First Metro Save and Learn Fixed Income Fund,Inc. 6.79%
Mutual fund Cocolife Cocolife Fixed Income Fund, Inc. 4.83%
Mutual fund ALFM Ekklesia Mutual Fund Inc. 4.44%
Mutual fund ALFM ALFM Peso Bond Fund, Inc. 4.20%
Mutual fund Grepalife Grepalife Fixed Income Fund Corp. 2.72%
Mutual fund ATRAM ATRAM Corporate Bond Fund, Inc. 2.30%

How much can you earn from a money market fund?

See below projections for annual returns ranging from 1% to 5% for an annual investment of ₱10,000. Fees are not included in the computation.

YEAR SAVINGS 1% 2% 3% 4% 5%
1 10,000 10,100 10,200 10,300 10,400 10,500
2 20,000 20,301 20,604 20,909 21,216 21,525
3 30,000 30,604 31,216 31,836 32,465 33,101
4 40,000 41,010 42,040 43,091 44,163 45,256
5 50,000 51,520 53,081 54,684 56,330 58,019
6 60,000 62,135 64,343 66,625 68,983 71,420
7 70,000 72,857 75,830 78,923 82,142 85,491
8 80,000 83,685 87,546 91,591 95,828 100,266
9 90,000 94,622 99,497 104,639 110,061 115,779
10 100,000 105,668 111,687 118,078 124,864 132,068
15 150,000 162,579 176,393 191,569 208,245 226,575
20 200,000 222,392 247,833 276,765 309,692 347,193
25 250,000 285,256 326,709 375,530 433,117 501,135
30 300,000 351,327 413,794 490,027 583,283 697,608

Is money market fund right for you?

Money market funds commonly are a fit for people if you are saving up for short-term goals. That would cover anything from goals that range in a matter of months or one year.

Also, it can be a suitable should you want to avoid investments with too much risks. They can be attractive to investors who would want to minimize capital loss in a bearish market.

Additionally, they may be an option too for emergency funds. Just look out for any holding period and any associated fees.

Aside from savings accounts, it can be utilized by retirees who would want to let their retirement savings to grow with modest gains while still enjoying the ability to be able to get their money any time especially in funds without any holding period or exit fee.

How can you subscribe to a money market fund?

So how can you start investing in money market fund?

As stated earlier, you have four options to choose from: mutual funds, UITF, PERA or variable universal life insurance (VUL). You can check this article on the differences among managed funds.

  1. Check your current financial status. Define your goals, what exactly are you saving up for?
  2. Come up with a financial plan in order to meet your goals. Research the specific money market funds that can help you achieve them. Choose the one that has the least sales load, little to no exit fee, shortest to no holding period, and the least management fee.
  3. Choose any of mutual fund companiesUITF companies, banks that offer PERA, and insurance companies that offer VUL. This is where you choose an institution that make account management easy for you because they’re conveniently located, have proven track record of stability, good customer service, etc.
  4. Set up an appointment with qualified sales representative. A mutual fund rep must be licensed by Securities and Exchange Commission, a UITF and PERA rep is registered trust fund agent, and the person who can sell VULs must be a licensed insurance financial advisor.
  5. You must be at least 18 years old. If you’re signing up for your child who is a minor, you may ask about in-trust for (ITF) documents.
  6. Make sure that you prepare at least one valid identification card.
  7. Prepare the minimum starting capital.
  8. You’d be asked to complete a few documents about your income, source of income (employment, business, etc), and other information. Be honest. The rep can help give you pointers on risks, forecast of the funds, historical performance, etc.
  9. If you think you’re good to go, sign up and make your deposit. Wait for confirmation on account creation, subscription, and other details.
  10. Keep tabs on the updates of the fund: current net asset value, any changes of the prospectus, etc.



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