Don’t you know that there’s a stock that holds stocks of other companies? It is called the exchange traded fund, and in the Philippines we have the First Metro Philippine Equity Exchange Traded Fund. It is known by its stock ticker, FEMTF.
This article discusses an actual ETF that you can start invest to earn passive income. If this is your first time learning about it, please consider reading up the guide on ETF investing and then you can come back to this page later.
What is FMETF?
FMETF stands for First Metro Philippine Equity Exchange Traded Fund. It is the only exchange traded fund in the market today. Established on January 15, 2013, it was launched by the First Metro Investment Corporation (FMIC), a wholly-owned subsidiary of the Metrobank Group. The First Metro Asset Management, Inc., a company which also sells mutual funds, is its fund manager and principal distributor.
Like mutual funds or UITFs, it holds a basket of shares of companies. However, it is different because you can only invest in it by buying its stocks on the Philippine Stock Exchange. In short, it a fund that is traded on the stock market.
Investment goal of FMETF
Its goal is to simply match the return of the stock index. The stock index is composed of the top 30 companies that are being traded on the Philippine Stock Exchange, which are collectively called the Philippine Stock Exchange index (PSEi).
FMETF achieves this by buying only these companies. Not only that, it also tries to match the proportion of each company to the index as closely as possible.
See the table below for comparison between the composition of the fund and PSEi.
|Security Name||PSEi %||FMETF %|
|SM INVESTMENTS CORPORATION||13.14||13.04|
|AYALA LAND, INC.||9.94||9.8|
|SM PRIME HOLDINGS, INC.||9||8.97|
|BDO UNIBANK, INC.||7.09||7.1|
|JG SUMMIT HOLDINGS, INC.||5.18||5.16|
|BANK OF THE PHILIPPINE ISLANDS||4.3||4.31|
|UNIVERSAL ROBINA CORPORATION||4.29||4.22|
|INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.||3.7||3.67|
|ABOITIZ EQUITY VENTURES, INC.||3.67||3.68|
|METROPOLITAN BANK & TRUST COMPANY||3.53||3.51|
|JOLLIBEE FOODS CORPORATION||3.43||3.52|
|PHILIPPINE LONG DISTANCE TELEPHONE COMPANY “Common”||2.75||2.99|
|MANILA ELECTRIC COMPANY||2.29||2.23|
|GT CAPITAL HOLDINGS, INC.||2.03||1.9|
|SECURITY BANK CORPORATION||1.95||1.87|
|GLOBE TELECOM, INC.||1.61||1.81|
|METRO PACIFIC INVESTMENTS CORPORATION||1.61||1.6|
|SAN MIGUEL CORPORATION||1.58||1.6|
|ROBINSONS LAND CORPORATION||1.37||1.33|
|ABOITIZ POWER CORP.||1.3||1.22|
|ALLIANCE GLOBAL GROUP, INC.||1.17||1.15|
|BLOOMBERRY RESORTS CORPORATION||1.12||1.14|
|LT Group, Inc.||1.11||1.17|
|PUREGOLD PRICE CLUB, INC.||1.1||1.14|
|ROBINSONS RETAIL HOLDINGS INC.||1.06||1.04|
|DMCI HOLDINGS, INC.||0.94||0.92|
|FIRST GEN CORPORATION||0.79||0.9|
|SEMIRARA MINING AND POWER CORPORATION||0.64||0.57|
The composition of the fund is adjusted periodically. This is because PSE also reviews the companies that make up the index, and may either stick to the current list or update it. The review is done every six months.
Features of FMETF
Now that you have a basic understanding of how the fund works, it’s time to discuss some of the finer details. The following are some of its common features.
- market price
The net asset value per share is the the fund’s assets minus liabilities, and then divided by the number of outstanding shares. It indicates how much value each share holds. With FMETF, this is computed every minute during trading hours.
The market price is what investors are willing to buy or sell for each FMETF. It varies as frequently as there is a trade that is occurring at any given moment. In a perfect world, the market price must be equal to the NAVPS.
However at times, what people are willing to pay to buy its stock may not be the same as the NAVPS. This is where arbitrage occurs. It tries to bring the market price as close as possible to NAVPS by either selling shares when price is high or buying them when the price is down.
How to buy FMETF stock
In investing, you would need the following.
- Broker’s account
- Minimum investment
A broker is the company that executes your trade. Through them, you can buy and sell stocks. Example companies are Unicapital Securities Inc., First Metro Securities Inc., Col Financial, etc.
How much is the initial capital? Actually, it is set by the Philippine Stock Exchange. Your minimum investment depends on the minimum board lot, which factors in the price of the stock. In the table below, it shows that you need to buy at least 10 shares per transaction since current market price is ₱120.
Once you have an account set up, you can already start trading. You should be able to see the FMETF ticker.
Whenever you trade, there will be fees: broker’s commission, value added tax, PSE fee, Securities Clearing Corporation of the Philippines fee, and seller’s tax.
Advantages of investing in FMETF
Why invest in FMETF? These are the benefits when you start buying its stock.
Buying its stock to participate in the earning potential of “blue chip” companies is less costly than purchasing individual shares. The table below shows the actual price of one share of each “blue chip” company and how much you’ll need if you buy the minimum number of shares (called board lot) of all of them. At this rate, you’d need to have at least ₱128,266.50.
Compare that to one exchange traded fund stock that costs ₱120 more or less, and that already contains all of these companies. (All the prices are updated as of July 11, 2019).
|Security Name||Last Trade Price||Board lot||Total|
|ABOITIZ EQUITY VENTURES, INC.||910.00||10||9,100.00|
|ABOITIZ POWER CORP.||56.00||10||560.00|
|ALLIANCE GLOBAL GROUP, INC.||15.40||100||1,540.00|
|AYALA LAND, INC.||36.70||10||367.00|
|BANK OF THE PHILIPPINE ISLANDS||142.30||10||1,423.00|
|BDO UNIBANK, INC.||11.42||100||1,142.00|
|BLOOMBERRY RESORTS CORPORATION||78.50||10||785.00|
|DMCI HOLDINGS, INC.||10.02||100||1,002.00|
|FIRST GEN CORPORATION||27.00||100||2,700.00|
|GLOBE TELECOM, INC.||2,174.00||5||10,870.00|
|GT CAPITAL HOLDINGS, INC.||845.00||10||8,450.00|
|INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.||142.50||100||14,250.00|
|JG SUMMIT HOLDINGS, INC.||282.00||100||28,200.00|
|JOLLIBEE FOODS CORPORATION||69.70||10||697.00|
|LT Group, Inc.||15.58||100||1,558.00|
|MANILA ELECTRIC COMPANY||71.50||10||715.00|
|METRO PACIFIC INVESTMENTS CORPORATION||383.00||10||3,830.00|
|METROPOLITAN BANK & TRUST COMPANY||4.80||1000||4,800.00|
|PHILIPPINE LONG DISTANCE TELEPHONE COMPANY “Common”||45.50||100||4,550.00|
|PUREGOLD PRICE CLUB, INC.||26.65||100||2,665.00|
|ROBINSONS LAND CORPORATION||78.00||10||780.00|
|ROBINSONS RETAIL HOLDINGS INC.||23.00||100||2,300.00|
|SAN MIGUEL CORPORATION||173.00||10||1,730.00|
|SECURITY BANK CORPORATION||980.00||10||9,800.00|
|SEMIRARA MINING AND POWER CORPORATION||174.90||10||1,749.00|
|SM INVESTMENTS CORPORATION||38.50||100||3,850.00|
|SM PRIME HOLDINGS, INC.||1,198.00||5||5,990.00|
|UNIVERSAL ROBINA CORPORATION||175.00||10||1,750.00|
Matches returns of the index
It holds a basket of shares from the top 30 companies whose businesses are judged to be representative of the stock market. In the process, its returns is close to how the index performs.
The fund is passively managed. What this means is that the fund manager’s job is relatively easy. There is not much research that goes into determining how many and what shares to buy.
This translates to lower management fee, which is 0.50% of the total net asset value according to disclosures. That’s lower than most, if not all, mutual funds and UITFs that are available in the Philippine market.
By holding one FMETF stock, you’re exposed to a diversified portfolio of businesses across different industries. It dampens the impact when one company or an industry experiences a slowdown.
Its stock is priced continuously unlike mutual funds and UITFs whose prices are determined at the end of the trading day. Also, its underlying assets are disclosed on the website. You can see them all on First Metro’s website.
And here are a few of the disadvantages.
- You need to partner with a stock broker to buy the stock.
- Its market price may be more than its value, so you’re buying an overvalued stock. Check the net asset value per share when you’re about to trade.
- You have no control on the list of companies that make up its underlying assets.
- If you want to get your money back, you need to wait for someone to buy your shares.
What is the historical performance of FMETF?
|1 year||3 years||5 years||Accumulative|
The table shows the compounded annual growth rate for 1 year, 3 years, and 5 years. For comparison, there’s a row for FMETF and the Philippine Stock Exchange index.
The last column shows how much your money would’ve grown five years ago, which is roughly more than double your original investment. So if you invested ₱10,000 five years ago, your money would now be worth ₱22,286 with fees excluded.
Again, it’s worth remembering that past performance does not guarantee future returns.