Investing in top Philippine money market funds

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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

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?

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.

A sample money market fund portfolio

As you can see, the portfolio has the following: bank time deposits, LTNCDs (long term negotiable certificate of deposit), government bonds, corporate issues, treasury 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

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 UITF, mutual funds, PERA 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

Not insured

Whenever you invest, your money is not insured unlike LTNCD, savings 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

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

NameTypeInitialAddSales loadFeeHoldExit
ALFM Money Market Fund, Inc.Mutual funds5,0001,0005%0.50%7 days1%
First Metro Save and Learn Money Market Fund, Inc.Mutual funds5,0001,000None0.50%7 days1%
Philam Managed Income Fund, Inc.Mutual funds??????
Sun Life Prosperity Dollar Starter Fund, Inc.Mutual funds$500$100None0.25%7 days0.25%
Sun Life Prosperity Money Market Fund, Inc.Mutual funds100100None0.25%7 days0.25%
BDO PERA SHORT TERM FUND PERA1,0001,0000.50%30 calendar0.50%
BPI PERA Money Market FundPERA1,0001,0000.50%NoneNone
Landbank PERA Money Market FundPERA5,0001,0001%30 calendar days25% on net earnings or 500, whichever is higher
AB CAPITAL SHORT-TERM FUNDUITF50,00025,0000.375% p.a.0 calendarNONE
Security Bank Peso Money Market FundUITF10,0001,0000.30% per annum based on the Net Asset Value (NAV)30 calendar0.5% of amount redeemed
ATRAM Peso Money Market FundUITF50500.50% p.a.0 bankingNone
Bank of Commerce DIVERSITY MONEY MARKET FUNDUITF10,0005,0000.25% p.a.30 calendar5% of the redeemed amount
BDO INSTITUTIONAL CASH RESERVE FUNDUITF00None0 calendarNone
BDO PESO MONEY MARKET FUNDUITF10,00010,0000.50% p.a.0 calendarNone
BDO SHORT TERM FUNDUITF10,00010,0000.50% p.a. 30 calendar0.50% of the Original Participation Amount 
BPI Short Term FundUITF10,0001,0000.25% p.a.0 calendarNone
BPI Money Market FundUITF10,0001,0000.50% p.a.0 calendarNone
CHINA BANK MONEY MARKET FUNDUITF5,0001,0000.25% p.a.0 calendarNone
CHINA BANK CASH FUND (formerly CBC INSTITUTIONAL MMF)UITF5,0001,0000.25% per annum based on the Net Asset Value (NAV) of the Fund before trust fee for the day3 banking1.0% of the amount redeemed
CHINA BANK SHORT-TERM FUNDUITF5,0001,0000.15%p.a. based on the Net Asset Value (NAV) of the Fund before trust fee for the day3 banking1.0% of the amount redeemed
CTBC Money Market FundUITF10,00010,0000.25% per annum based on the Net Asset Value (ANV) of the Fund before trust fee for the day3 banking1.0% of the amount redeemed
Development Bank of the Philippines UNLAD KAWANI MONEY MARKET FUNDUITF25250.25%30 calendar0.50%
Development Bank of the Philippines CLASS I – UNLAD PANIMULA MM FUNDUITF1,000,000100,0000.05% p.a.0 calendarNone
Development Bank of the Philippines CLASS II – UNLAD PANIMULA MM FUNDUITF100,00010,000.15% p.a. 0 calendarNone
Development Bank of the Philippines CLASS III – UNLAD PANIMULA MM FUNDUITF10,0001,000.25% p.a. 0 calendarNone
EastWest Peso Money Market FundUITF10,0001,000.30% p.a.0 calendarNone
East West Peso Short Term FundUITF10,0001,0000.25% p.a. of the market value of the fund0 calendarNone
LANDBANK Money Market FundUITF5,0001,0000.25% p.a of the market value of the fund0 calendarNot applicable
LANDBANK Money Market Plus FundUITF5,0001,0000.20%7 calendar25% of net earnings (P500 minimum)
Maybank Tiger Peso Money Market Feeder FundUITF10,0001,0000.50%30 calendar25% of net earnings (P500 minimum)
Metro Money Market FundUITF50,00025,0000.25% p.a. 7 banking0.25% of redemption proceeds
Metro Short Term FundUITF25,00010,0000.60% p.a. based on Net Asset Value (NAV)7 calendar50% of income on redeemed amount
PBCOM Money Market FundUITF10,00010,0000.60% p.a. based on Net Asset Value (NAV)7 calendar50% of income on redeemed amount
PNB PRIME PESO MONEY MARKET FUNDUITF10,00010,0000.5% p.a. 30 calendar0.125% of redemption value
PNB GLOBAL FILIPINO PESO MONEY MARKET FUNDUITF5,0005,0000.50% p.a.5 banking50% of Income Earned
PNB DREAM BUILDER MONEY MARKET FUNDUITF2,0002,0000.50% p.a.5 banking50% of Income Earned
PNB INSTITUTIONAL MONEY MARKET FUNDUITF10,0001,000,0000.5% p.a. of fund value30 calendar50% of Income Earned
PNB PESO FIXED INCOME FUNDUITF10,00010,0000.125% p.a. of Fund Value3 banking50% of Income Earned
PSBANK MONEY MARKET FUNDUITF10,0005,0000.5% p.a. of fund value5 banking50% of income earned
RIZAL PESO MONEY MARKETUITF5,0001,0000.50% p.a. based on Net Asset Value (NAV)30 calendar1.00% 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 FUNDUITF5,0001,0000.50% based on NAV0 calendarNone
RIZAL PESO CASH MANAGEMENT FUNDUITF1,000,000100,0000.25% per annum0 calendarNone
Robinson Bank Peso Money Market FundUITF100,00010,0000.25% based on NAV0 calendarNone
SB PESO MONEY MARKET FUNDUITF10,0005,0000.25% per annum14 calendar1-3 days 100% of interest earned ; 4 < 14 days 50% of interest earned
Sterling Money Market FundUITF10,0005,0000.35% p.a.0 calendarN/A
UnionBank Peso Short Term Fixed Income PortfolioUITF001.00% p.a.30 calendar0.50% of the net proceeds
UCPB Cash Management Fund (Formerly United Cash Management Fund)UITF1,0001,0001% per annum; 0.34% for the quarter90 calendarNot 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%.

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 FUND (formerly AUP GS FUND)11.35%
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%

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.

YearSavings1%2%3%4%5%
110,00010,10010,20010,30010,40010,500
220,00020,30120,60420,90921,21621,525
330,00030,60431,21631,83632,46533,101
440,00041,01042,04043,09144,16345,256
550,00051,52053,08154,68456,33058,019
660,00062,13564,34366,62568,98371,420
770,00072,85775,83078,92382,14285,491
880,00083,68587,54691,59195,828100,266
990,00094,62299,497104,639110,061115,779
10100,000105,668111,687118,078124,864132,068
15150,000162,579176,393191,569208,245226,575
20200,000222,392247,833276,765309,692347,193
25250,000285,256326,709375,530433,117501,135
30300,000351,327413,794490,027583,283697,608

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 companies, UITF 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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