How to invest in bond funds in the Philippines

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Bond funds are great for conservative investors but why? How can you get started with them? What is the required initial amount? What companies are offering them? And what are the best performing bond funds in the Philippines to invest? These are the questions that I will cover in this article.

Bond funds

Bond funds, as their name suggest, are investment funds whose assets are in the form of bonds. They can be offered by a mutual fund companies, banks or trust entities that offer unit investment trust fund (UITF) or Personal Retirement and Savings Account (PERA), or insurance company that offers Variable Universal Life (VUL) policy.

What is a bond?

Bonds are debts, and it works exactly like borrowing money to someone. There is the capital (the amount owed, also called par value), the interest (the additional money paid on top of capital in exchange for the privilege of borrowing), and the length of time that the debt has to be settled (called maturity). An example is a retail treasury bond that is offered by the government through the Bureau of the Treasury.

Who offer bonds?

But who would offer bonds? Big institutions like governments and private corporations. The government, because it is a non-profit, cannot issue stocks so they issue bonds instead. They use the money that they raised to fund infrastructure projects, delivery of social services, etc.

Private corporations can create stocks to sell to investors, but this is something that they don’t do frequently because it dilutes or lessens the value of their stock. What they do instead is to offer bonds.

How do you earn from bonds?

Through bonds, institutions can get the money that they need while you earn interest. Usually, the interest is paid out regularly like every quarter, and this is why bonds are also called fixed income securities. The interest is set by the government or the institution that needed to borrow money. Other such details like maturity, frequency in which the interest is paid, and the minimum capital are likewise set at the outset.

You will hold the bond until maturity, which is the length of time (usually years) that you’d be receiving periodic interest. Once it matures, the institution will pay back your capital.

Top bond funds in the Philippines

Here is the list of the best bond funds in the Philippines for the year 2019. You can also check articles on best UITF and top mutual funds for the year, respectively, for the complete list of other funds. Again, past results do not guarantee future performance.

TypeBankFund NameROI
UITFUnion BankUnionBank Long Term Fixed Income Portfolio22.12%
UITFUnion BankUnionBank Tax Exempt Portfolio19.82%
UITFSecurity BankSB PESO BOND FUND19.29%
UITFBPIABF Philippines Bond Index Fund18.67%
UITFBPIBPI Fixed Income Portfolio Fund-of-Funds17.61%
UITFChina BankCHINA BANK FIXED INCOME FUND (formerly CBC GS FUND)17.13%
UITFBPIOdyssey Peso Bond Fund16.96%
UITFEastWestEastWest Peso Long Term Bond Fund15.66%
UITFManulifeManulife Income Builder Fund (Class I)15.51%
UITFUnion BankUnionBank Philippine Peso Fixed Income Portfolio15.16%
UITFManulifeManulife Income Builder Fund (Class A)13.81%
UITFRCBCRIZAL PESO BOND FUND13.08%
UITFUnion BankUnionBank High Net Worth Intermediate-Term Peso Fixed Income Portfolio12.90%
UITFBDOBDO MERIT FUND MEDIUM TERM PORTFOLIO12.90%
UITFAtramATRAM Total Return Peso Bond Fund12.54%
UITFAsia United BankPeso Investment Trust Fund11.86%
Mutual fundPhilamPhilam Bond Fund, Inc.11.54%
UITFUCPBUCPB Peso Bond Fund (Formerly United Conservative Fund)11.46%
UITFBDOBDO PESO BOND FUND11.35%
UITFBDOBDO PERA BOND INDEX FUND11.35%
UITFBDOBDO GS FUND11.35%
UITFBDOBDO MERIT FUND INTERMEDIATE TERM PORTFOLIO11.35%
UITFBPIOdyssey Peso Medium Term Bond Fund11.35%
UITFBPIBPI Premium Bond Fund11.35%
UITFChina BankCHINA BANK INTERMEDIATE FIXED-INCOME FUND11.35%
UITFEastWestEastWest Peso Intermediate Term Bond Fund11.35%
UITFLand BankLANDBANK Bond Fund11.35%
UITFManulifeManulife Stable Income Fund (Class I)11.35%
UITFManulifeManulife Stable Income Fund (Class A)11.35%
UITFManulifeManulife Asia Dynamic Bond Feeder Fund (PHP Unhedged Class A)11.35%
UITFMaybankMaybank Tiger Peso Bond Feeder Fund11.35%
UITFMetrobankMetro Corporate Bond Fund11.35%
UITFMetrobankMetro Max-5 Bond Fund11.35%
UITFMetrobankMetro Aspire Bond Feeder Fund11.35%
UITFMetrobankMetro Max-3 Bond Fund11.35%
UITFMetrobankMetro Unit Paying Fund11.35%
UITFPhilippine Business BankDiamond Fund11.35%
UITFPNBPNB PESO INTERMEDIATE TERM BOND FUND11.35%
UITFUnion BankUnionBank Intermediate Term Fixed Income Portfolio11.35%
UITFUnion BankUnionBank Infinity Prime Portfolio11.35%
Mutual fundSun LifeSun Life of Canada Prosperity Bond Fund, Inc.11.20%
Mutual fundSun LifeSun Life Prosperity GS Fund, Inc.10.47%
Mutual fundSoldivoSoldivo Bond Fund, Inc.8.03%
Mutual fundPhilequityPhilequity Peso Bond Fund, Inc.7.71%
Mutual fundFAMIFirst Metro Save and Learn Fixed Income Fund,Inc.6.79%
Mutual fundCocolifeCocolife Fixed Income Fund, Inc.4.83%
Mutual fundALFMEkklesia Mutual Fund Inc.4.44%
Mutual fundALFMALFM Peso Bond Fund, Inc.4.20%
Mutual fundGrepalifeGrepalife Fixed Income Fund Corp.2.72%
Mutual fundATRAMATRAM Corporate Bond Fund, Inc.2.30%

Philippine companies that offer bond funds

The following offer bond funds to the investing public:

And here’s the list of Philippine mutual fund, UITF and PERA companies that offer bond funds.

Fund nameTypeCompany
ABF Philippines Bond Index FundUITFBPI Asset Management and Trust Corporation
ALFM Peso Bond Fund, Inc.Mutual fundBPI Asset Management 
ATRAM Corporate Bond Fund, Inc.Mutual fundATRAM
ATRAM Global Bond Income Feeder FundUITFATRAM Trust Corporation
ATRAM Total Return Peso Bond FundUITFATRAM Trust Corporation
BDO GS FUNDUITFBDO Unibank, Inc.
BDO MERIT FUND INTERMEDIATE TERM PORTFOLIOUITFBDO Unibank, Inc.
BDO MERIT FUND MEDIUM TERM PORTFOLIOUITFBDO Unibank, Inc.
BDO PERA Bond Index FundPERABDO
BDO PERA BOND INDEX FUNDUITFBDO Unibank, Inc.
BDO PESO BOND FUNDUITFBDO Unibank, Inc.
BPI Fixed Income Portfolio Fund-of-FundsUITFBPI Asset Management and Trust Corporation
BPI PERA Government Bond FundPERABPI
BPI Premium Bond FundUITFBPI Asset Management and Trust Corporation
CHINA BANK FIXED INCOME FUND (formerly CBC GS FUND)UITFChina Banking Corporation
CHINA BANK INTERMEDIATE FIXED-INCOME FUNDUITFChina Banking Corporation
Cocolife Fixed Income Fund, Inc.Mutual fundCoco Life
Diamond FundUITFPhilippine Business Bank
DIVERSITY PESO BOND FUNDUITFBank of Commerce
EastWest Peso Intermediate Term Bond FundUITFEastWest Banking Corporation
EastWest Peso Long Term Bond FundUITFEastWest Banking Corporation
Ekklesia Mutual Fund Inc.Mutual fundBPI Asset Management 
First Metro Save and Learn Fixed Income Fund,Inc.Mutual fundFAMI
Grepalife Fixed Income Fund Corp.Mutual fundGrepalife
LANDBANK Bond FundUITFLandBank of the Philippines
Landbank PERA Bond FundPERALandbank
Manulife Asia Dynamic Bond Feeder Fund (PHP Unhedged Class A)UITFManulife Asset Management and Trust Corporation (MAMTC)
Manulife Income Builder Fund (Class A)UITFManulife Asset Management and Trust Corporation (MAMTC)
Manulife Income Builder Fund (Class I)UITFManulife Asset Management and Trust Corporation (MAMTC)
Manulife Stable Income Fund (Class A)UITFManulife Asset Management and Trust Corporation (MAMTC)
Manulife Stable Income Fund (Class I)UITFManulife Asset Management and Trust Corporation (MAMTC)
Maybank Tiger Peso Bond Feeder FundUITFMaybank Philippines Inc.
Metro Aspire Bond Feeder FundUITFMetropolitan Bank & Trust Co.
Metro Corporate Bond FundUITFMetropolitan Bank & Trust Co.
Metro Max-3 Bond FundUITFMetropolitan Bank & Trust Co.
Metro Max-5 Bond FundUITFMetropolitan Bank & Trust Co.
Metro Unit Paying FundUITFMetropolitan Bank & Trust Co.
Odyssey Peso Bond FundUITFBPI Asset Management and Trust Corporation
Odyssey Peso Medium Term Bond FundUITFBPI Asset Management and Trust Corporation
Odyssey Tax-Exempt Peso Fixed Income FundUITFBPI Asset Management and Trust Corporation
Peso Investment Trust FundUITFAsia United Bank
Philam Bond Fund, Inc.Mutual fundPAMI
Philequity Peso Bond Fund, Inc.Mutual fundPhilequity
PNB PESO INTERMEDIATE TERM BOND FUND (formerly AUP GS FUND)UITFPhilippine National Bank
RIZAL PESO BOND FUNDUITFRizal Commercial Banking Corporation
SB PESO BOND FUNDUITFSecurity Bank Corporation
Soldivo Bond Fund, Inc.Mutual fundSoldivo
Sun Life of Canada Prosperity Bond Fund, Inc.Mutual fundSun Life
Sun Life Prosperity GS Fund, Inc.Mutual fundSun Life
UCPB Peso Bond Fund (Formerly United Conservative Fund)UITFUnited Coconut Planters Bank
UnionBank High Net Worth Intermediate-Term Peso Fixed Income FundUITFUnion Bank
UnionBank High Net Worth Medium-Term Peso Fixed Income FundUITFUnion Bank
UnionBank Infinity Prime FundUITFUnion Bank
UnionBank Long Term Fixed Income PortfolioUITFUnion Bank
UnionBank Medium Term Fixed Income PortfolioUITFUnion Bank
UnionBank Philippine Peso Fixed Income PortfolioUITFUnion Bank
UnionBank Tax Exempt PortfolioUITFUnion Bank

Advantages of investing in bond funds

With bond funds, your investment as well as those from other investors will be used to acquire these debt instruments.

But why invest in bond funds? What are the benefits of going into managed funds rather than buying bonds directly?

Less risky

All investments have risks, but risks are not created equally. With bond funds, the level of risks is determined by the nature of the bonds being acquired. Generally, government bonds are considered relatively less risky securities because the Philippine government has paid out its debt obligations.

Also, the interest and the capital that was borrowed remain the same. The same cannot be said about buying stocks whose price can increase or decrease in real-time.

Fixed income

The income that you can receive in the form of interest is stable. It does not change. In effect, the gains of funds that invest in them can be steady and predictable.

Low starting capital

Perhaps the biggest advantage of bond funds is that you don’t have to put a big capital to get started. Unlike when you buy bonds by yourself where the minimum can start between P50,000 and P100,000 or even more, these funds allow you to begin investing with a very low starting amount.

Disadvantages of bond funds

Risks

There are several risks although they occur relatively infrequently. For instance, the interest may not be paid out or that the interest payment schedule is not followed. The maturity or term may be extended, and there is also the risk of default.

Fees

Just like any other investment funds, bond funds have costs in terms of operations and hiring a manager to oversee the bonds being acquired. These costs are passed on to investors like you in the form of sales load and management fee.

Some funds would also require that you stay for a minimum length of time called lock-in period. When you redeem your investments, you would be charged exit fee.

Returns

Another drawback is that the returns that you get from these types of funds are historically less than the potential earnings from moderately aggressive and riskier securities index funds over long term. However past performance does not guarantee future returns.

Tax

Any interest earned is liable for a 20% tax. You would not notice this though as taxes are computed into the net asset value per share or net asset value per unit.

Features of bond funds

A bond fund is just like any other managed funds. For more in-depth discussions, you may read mutual funds, UITF, and PERA. There, you’d see the specific details. It has the following common features:

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

Initial capital

The initial capital is the starting amount so you can begin your fund. Some companies would allow you to open for as low as P50 and others would require at least P500,000 to start.

Additional investment

The additional investment is the required minimum when you want to add to your account. The range is between P50 and P100,000.

Management fee

The management fee is a portion of the fund that goes towards paying for its operation, management, and other cost. It is commonly a percentage of the entire value of the fund.

You don’t have to pay this out-of-pocket. It is computed into the net asset value per share or net asset value per unit.

Holding period

Holding or lock-in period is the length of time that you need to keep investments. If you withdraw before the period is up, you would be liable to pay for any exit fee.

Exit fee

Exit fee is the charge when you redeem your investments before the lock-in period is up.

Sales load

Sales load, also called front-end/back-end fee, is a charge every time you invest. It is a percentage of the capital that you put up whether it’s your first or your additional investment.

The sales load customarily goes to registered or licensed agent who helped you set up the account. Almost all mutual funds charge sales load, while only a few UITF have a sales load.

Bond fund fees

Here is the summary of bond fund fees.

NameTheTypeInitialAddManagement FeeHoldExitSales load
ABF Philippines Bond Index FundUITF10,0001,0000.080% Trust Fee / 0.186% Management and Advisory Fee0 calendarNone
ALFM Peso Bond Fund, Inc.Mutual fund5,0001,0001.25%90 days1%1%
ATRAM Corporate Bond Fund, Inc.Mutual fund50502.24%6 months1.20%5%
ATRAM Global Dividend Feeder FundUITF1,0001,0001%0 calendarnone
ATRAM Total Return Peso Bond FundUITF50501%30 calendar1%
BDO Gs FundUITF100,000100,0001%30 calendar1%
BDO Merit Fund Intermediate Term PortfolioUITF1,0001,0001%0 calendarNone
BDO Merit Fund Medium Term PortfolioUITF1,0001,0001%0 calendarNone
BDO Peso Bond FundUITF10,00010,0001%30 calendar1%
BPI Fixed Income Portfolio Fund-of-FundsUITF1,000,00010,000None0 calendarNone
BPI Premium Bond FundUITF10,0001,0002%0 calendarNone
CHINA BANK FIXED INCOME FUND (formerly CBC GS FUND)UITF5,0001,0000.75%30 calendar1.00%
CHINA BANK INTERMEDIATE FIXED-INCOME FUNDUITF5,0001,0000.50%30 calendar1.00%
Cocolife Fixed Income Fund, Inc.Mutual fund1,0005002%1 year?3.50%
Diamond FundUITF40,00010,0000.50%30 calendar75% of earnings (15 days), 50% of earnings (16-29 days)
EastWest Peso Intermediate Term Bond FundUITF10,0001,0001% of the market value of the fund30 calendarPHP 500.00 or 0.25% of the withdrawn amount, whichever is higher
EastWest Peso Long Term Bond FundUITF50,0001,0001.0% of the market value of the fund180 calendarPHP 500.00 or 0.25% of the withdrawn amount, whichever is higher
Ekklesia Mutual Fund Inc.Mutual fund5,0001,0002%6 months0.88%1%
First Metro Save and Learn Fixed Income Fund, Inc.Mutual fund5,0001,0002%6 months1.75%1%
Grepalife Fixed Income Fund Corp.Mutual fund5,000$1,0002%1 year?2%
LANDBANK Bond FundUITF5,0001,0001.00%30 calendar25% of net earnings (P500 minimum)
Manulife Income Builder Fund (Class A)UITF5,0005,0001.50%365 calendar1.00% of the amount redeemed
Manulife Income Builder Fund (Class I)UITF5,0005,000N/A365 calendarN/A
Manulife Stable Income Fund (Class A)UITF5,0005,0001.25%365 calendar1.00% of the amount redeemed
Manulife Stable Income Fund (Class I)UITF5,0005,000N/A365 calendarN/A
Metro Aspire Bond Feeder FundUITF5,0001,000None0 calendarNone
Metro Corporate Bond FundUITF50,00025,0000.75%30 calendar50% of income on redeemed amount
Metro Max-3 Bond FundUITF50,00025,0001.00%30 calendar50% of income on redeemed amount
Metro Max-5 Bond FundUITF50,00025,0001.50%30 calendar50% of income on redeemed amount
Metro Unit Paying FundUITF500,000100,0000.50%30 calendar1.00% of redeemed amount 
Odyssey Peso Bond FundUITF10,0005,0001%0 calendarNone
Odyssey Peso Medium Term Bond FundUITF10,0005,0001%0 calendarNone
Odyssey Tax-Exempt Peso Fixed Income FundUITF100,00050,0001%0 calendarNone
Peso Investment Trust FundUITF10,0001,0001%30 calendar1%
Philam Bond Fund, Inc.Mutual fund1,0005003%6 months1.50%1%
Philequity Peso Bond Fund, Inc.Mutual fund10,0005,0001%2 years1.50%1%
PNB PESO INTERMEDIATE TERM BOND FUND (formerly AUP GS FUND)UITF10,00010,0000.75%30 calendar.50% of income earned, if any
RIZAL PESO BOND FUNDUITF50,00010,0000.50% based on NAV30 calendar0.125% of redemption proceeds
SB PESO BOND FUNDUITF10,0005,0001.00%0 calendarN/A
Soldivo Bond Fund, Inc.Mutual fund5,0001,0003.36%6 months1.50%1.12%
Sun Life of Canada Prosperity Bond Fund, Inc.Mutual fund1,0001,0002%None1%None
Sun Life Prosperity GS Fund, Inc.Mutual fund1,0001,0002%None1%None
UCPB Peso Bond FundUITF1,0001,0001.00%30 calendar5%
UCPB Peso Bond FundUITF1,0001,0001.00%30 calendar5%
UnionBank High Net Worth Intermediate-Term Peso Fixed Income FundUITF10,000,00000.13%0 calendar0
UnionBank High Net Worth Medium-Term Peso Fixed Income FundUITF10,000,00000.13%0 calendar0
UnionBank Infinity Prime FundUITF100,00002% per annum; 0.51% for the quarter90 calendar5% flat on redeemed amount
UnionBank Long Term Fixed Income PortfolioUITF100,00001% per annum; 0.33% for the quarter90 calendar2% or Php 500 whichever is higher
UnionBank Medium Term Fixed Income PortfolioUITF100,00000.75% per annum; 0.25% for the quarter90 calendar0.25% or Php 500 whichever is higher
UnionBank Philippine Peso Fixed Income PortfolioUITF100,00001% per annum; 0.33% for the quarter90 calendar0.25% or Php 500 whichever is higher
UnionBank Tax Exempt PortfolioUITF100,00000.25% per annum;  0.064% for the quarter90 calendarNone

Is bond fund right for you?

The bond fund is appropriate for conservative investors who have low tolerance to risks. It is a good fit for people who want to avoid capital loss, preserve the value of their investment, and expect modest, predictable gains.

It is also something that can be opened when you have short-term to medium-term financial goals. Because bonds don’t experience the same volatility as stocks, then you can actually expect to see that your original capital is not affected by any market slowdown.

How to get started with bond funds

Just like opening any other managed fund, you have to define what your financial goal first. Is this for intermediate, long, or medium-term need? From there, you can decide how much rate of return you’d like to expect, your risk profile, required capital, strategy (whether peso cost averaging or lump sump), etc.

Then, narrow down your options from the list of bond funds that you see from this article. You may also include the factors including the company, history, reputation, convenience, online access, customer service, etc.

You may also reach out to the company reps to ask for more details. This article only gives you an overview on how these funds work, but there may be some information that are specific to the fund and to the company.

Next, check the required documents, minimum required initial amount, and other stuff. Bring all of these so that you won’t have any encounter any hitches when start your account.

After you’ve opened the account, continue to track the gains of your fund.