Bank Marketing Association of the Philippines

Overcoming Road Blocks

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One of the biggest challenges facing the Philippine fund management industry today is that fund managers must contend with the prevailing investor paradigm of earning fixed and guaranteed interest rates-of-return that are devoid of risk.

“Majority of Filipino investors starts off at the same point – they want to earn high rates of return but are unwilling to shoulder any or completely ignore associated risks. The onus is upon fund managers to educate the market that achieving above average rates of return, or perhaps meeting a long-term financial goal, necessarily entails taking risks. We have to develop that level of sophistication and make a big push to educate and re-educate the market,” Garcia explains.

As is the case with most industries, educating the market can be a costly endeavor. But for those with a positive outlook on the future of the country, it may be an undertaking that will be well worth the trouble.

“We have everything in place to catapult the country into major development. The only thing holding us down is poor sentiment. If we are able to overcome that then we can expect everything to take
off and match the development of our Asian neighbors. We’re not apprehensive about spending on the education of investors because we believe our efforts will eventually pay-off,” Garcia assesses.
Investment 101 And just like learning about any complicated matter, it is best to start off with the basics.

” Financial planning is infinitely more complex than putting your savings in a time deposit. In managing portfolios to achieve financial goals, we try to come up with the right mix of investments – bonds, equities, and real estate, for example – that suit the risk tolerance, time horizon and other constraints of an investor” says Garcia.

The iBank Trust Center currently offers two Unit Investment Trust Funds (UITF) that cater to investors with a low to moderate risk appetite, who desire fixed income returns that are higher than traditional time deposits. iFund Silver and iFund-Philippine Dollar Bond Portfolio seek higher-yielding debt securities while limiting downside risk.

By pooling together the funds of various investors in a UITF and collectively investing these in various instruments such as treasury bonds, treasury notes, treasury bills and commercial papers, the Trust
Center achieves two goals.

First, the economies-of-scale work in favor of retail investors giving them access to investment opportunities that give better yields. Left on their own as retail investors, they can hardly come up with the critical investment mass needed to gain deeper and cheaper access to bond markets. Second, investing in a diversified portfolio reduces risk.

” Investors must never lose sight of the reality that all investments carry a certain amount of risk. The most obvious signal of risk is the rate-of-return (i.e. the higher the rate-of-return quoted, the higher the risk). But having said that, they must also understand that there are ways to reduce risk.”

” We all know that saying about not putting all our eggs in one basket. A properly diversified portfolio spreads out the risk of loss across several instruments with differing pay-off possibilities. This limits
the volatility of the portfolio’s overall returns,” says Garcia. How the iBank Trust Center Works At the iBank Trust Center, Garcia heads a team of portfolio managers who constantly monitor financial markets and analyze customer needs gathered through surveys. These raw data are used to make
portfolio management decisions and develop new investment products tailor-fitted to clients’ requirements.

” We have access to some of the best performing investments in the market. Most individuals will not even hear about the juiciest securities on-offer in the market. We constantly analyze market
information and juxtapose this with client objectives. The process allows us to make asset allocation decisions that optimize the risk-reward trade-off,” Garcia reveals.

Garcia, a graduate of IESE in Barcelona, one of Europe’s top 5 MBA schools, possesses international finance experience from previous stints at Citibank N.A. and General Motors in Europe. He approaches fund management as both a science and an art. A science in that it deals with volumes of hard statistics; an art in that data must be meshed with a reading of local and international sentiments to project where the market will go in the future. It is a prerequisite that members of the iBank Trust Center team be well-versed in portfolio management theory and practice. Two of them, including Garcia, share the distinction of being charter-holders of the Chartered Financial Analyst (CFA) designation, a globally recognized standard for measuring the competence and integrity of
investment professionals.

The CFA designation, held by most of Wall Street’s top investment professionals, is conferred through a series of examinations by the Association for Investment Management and Research, an international organization of more than 60,000 investment practitioners and educators in over 100 countries. To date, there are only about 50 CFA charter-holders in the Philippines.


Posted on Wednesday, March 26th, 2008 at 1:33 pm Print this Article Email this Article

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