Philippines Feeder Fund What It Is And How To Invest
Have you heard of feeder funds? Is this the first time you’ve come across them? If you said yes, then you’re in luck. This article is going to discuss what they are, who offer them, their pros and cons, and how you can get started in investing in them.
What is a PH feeder fund?
A feeder fund in the Philippines is a type of managed investment fund. In the country, they’re offered through UITF and mutual funds. It has two functions. One, it accepts money from people and two, it invests that money in another fund called the target fund.
Target fund
This second function is what makes it different. For example, exchange traded fund (ETF), unit investment trust fund (UITF), PERA and mutual funds invest directly in stocks and/or fixed income like bonds or money market instruments.
On the other hand, the pooled assets that feeder funds collected from people are to be invested in a target fund (also formally called a “collective investment scheme”) and this target fund trades stocks and fixed income securities that can be either from the local or foreign markets.
Thus, the target fund can be a mutual fund, UITF, or ETF that is located in the Philippines or abroad.
Benchmark
How well does a feeder fund perform?
This is answered by the benchmark set at the target fund level. The benchmark is the yardstick against which it is compared. It can be any bond or stock indexes that cover certain sections of the capital market. These indexes are said to give the average return on investment (ROI), so a feeder fund then has to be checked whether it had performed better by giving more than the average ROI. If it does, then it is said that it gives superior gains than if you’ve invested in an index fund.
What is the purpose of feeder fund?
There are ways to purchase securities. People can buy stocks from the stock market and retail treasury bonds from the government. They can also go to banks, trust companies, and mutual fund companies. There are funds too that allow investors exposure to foreign securities.
So why is there a need for a feeder fund? Because it allows people to get exposed to diversified portfolio here and abroad.
Say that you’d like to invest in US stocks. You have two options: open an account with a stock broker that accepts non-US customers. There are several outlets like Charles Schwab, Interactive Brokers, TD Ameritrade, etc. And you’d go through an account opening process that is longer, requires various documents, requires a high starting capital, etc.
And the other option is through feeder funds. It can be relatively easy and there is no need to open an international stock brokerage account to be able to invest in foreign shares.
What are the different types of feeder funds in the Philippines?
There are various types of feeder funds that are available to investors in the Philippines.
- Currency
- Market
- Securities
- Classes
- Compliance
Currency
They are available in different currencies including Philippine peso, US dollar, and Japanese yen.
Market
There are various feeder funds whose target funds have asset portfolio of securities that are domiciled in various locations worldwide.
The first on the list are those whose target funds are Philippine-based funds. And this is where the CTBC Bank – ATRAM Philippine Balanced Feeder Fund and CTBC Bank – Sun Life Philippine Stock Index Feeder Fund belong.
Most others are invested in international markets. In fact, you can choose to get ones specific to countries like the United States of America, China, and Japan. Or you can also invest in broad regions like Asia Pacific, Europe, and even global emerging and developed markets.
Securities
Feeder funds reflect the diverse portfolio of securities of the target funds. Thus, broadly, they are considered index funds, equities funds, balanced funds, bond funds, and money market funds depending on the underlying assets.
Classes
The same fund can be offered in multiple classes, and each class is made available to different investors. These are labeled with the letters of the alphabet. The labels, however, are not uniform across the industry. Each company that offer feeder funds has their own naming convention.
For instance, as a hypothetical example, the same bond fund is offered to retail investors which is marked Class A and it is also offered to institutional investors which is marked Class I or B. And it may be offered to high net worth individuals, which will be marked Class F.
Multi-class funds remind you of the saying that it is expensive to be poor. Class A (or the class that is offered to retail investors) has higher trust fee than those offered to institutional and high net worth investors.
Compliance
Lastly, there is a fund that reflects compliance to a particular religion’s values. Which is similar to Islamic indexes in other countries like Australia and international markets that are created in a way that complies with Shariah laws.
See below the list of feeder funds, the market that they’re targeted to, benchmark, and the target fund.
| FUND NAME | MARKET | BENCHMARK | TARGET FUND |
|---|---|---|---|
| ATRAM Asia Equity Opportunity Feeder Fund | Asia except Japan | MSCI AC Asia Pacific ex Japan Net Index | JP Morgan Asia Equity Dividend Fund |
| ATRAM Emerging Markets Bond Feeder Fund | Global | JP Morgan EMBI Global Index | Templeton Emerging Markets Bond Fund |
| ATRAM Emerging Markets Equity Opportunity Feeder Fund | Global | MSCI Emerging Markets Index | Templeton Emerging Markets Fund |
| ATRAM European Equity Opportunity Feeder Fund | Europe | MSCI Europe Net Index | BlackRock Global Funds (BGF) – European Equity Income Fund |
| ATRAM Global Allocation Feeder Fund | Global | 36% S&P 500 TR; 24% FTSE World (ex-US); 24% ML US Treasury Current 5-Year; 16% Citigroup Non-USD World Government Bond Index | BlackRock Global Funds (BGF) – Global Allocation Fund |
| ATRAM Global Bond Income Feeder Fund | Global | 1/3 each – Bloomberg Barclays Global Aggregate Credit ex Emerging Markets, USD Hedged; ICE BofAML BB‑B Rated Developed Markets High Yield Constrained Index, USD Hedged; and JPMorgan EMBI Global, USD Hedged | PIMCO Diversified Income Fund |
| ATRAM Global Consumer Trends Feeder Fund (PHP Unit Class) | Global | MSCI World Consumer Discretionary Index, Net Dividends | Invesco Global Consumer Trends Fund |
| ATRAM Global Dividend Feeder Fund | Global | MSCI AC World Net Index | Fidelity Funds – Global Dividend Fund |
| ATRAM Global Equity Opportunity Feeder Fund | Global | MSCI World Index | Fidelity Funds – International Fund |
| ATRAM Global Financials Feeder Fund | Global | MSCI AC World Financials Index | BlackRock Global Funds (BGF) – World Financials Fund |
| ATRAM Global Multi-Asset Income Feeder Fund (PHP Unit Class) | Global | Target Fund Benchmark | JP Morgan Multi Income Fund |
| ATRAM Global Technology Feeder Fund | Global | MSCI AC World Information Technology Index | Fidelity Funds – Global Technology Fund |
| ATRAM Global Total Return Bond Feeder Fund | Global | Bloomberg Barclays Multiverse Index | Templeton Global Total Return Fund |
| ATRAM Global Multi-Asset Income Feeder Fund (USD Unit Class) | Global | Target Fund Benchmark | JP Morgan Multi Income Fund |
| ATRAM US Equity Opportunity Feeder Fund | US | Russell 3000 Growth Index | Franklin U.S. Opportunities Fund |
| BDO CHINA EQUITY FEEDER FUND | China | Blend of the CSI300 Index for the China A Shares and the MSCI China for the non-China A shares | BlackRock Global Funds (BGF) China Fund |
| BDO DEVELOPED MARKETS PROPERTY INDEX FEEDER FUND | Global | FTSE EPRA/NAREIT Developed Markets Index | iShares Developed Markets Property Yield UCITS ETF |
| BDO EUROPE EQUITY FEEDER FUND | Europe | MSCI Europe Index | BGF BlackRock European Focus Fund (Class D2 USD Share Class ISIN LU0827878959) |
| BDO GLOBAL EM EQUITY INDEX FEEDER FUND | Global | MSCI Emerging Markets Index | BlackRock Global Index Funds (BGIF) iShares Emerging Markets Equity Index Fund (D2 USD Share Class ISIN LU1811364212) |
| BDO GLOBAL EQUITY INDEX FEEDER FUND | Global | MSCI World Index | BlackRock Global Index Funds (BGIF) iShares World Equity Index Fund (D2 USD Share Class with ISIN LU1811364055) |
| BDO GLOBAL EQUITY SELECT FEEDER FUND | Global | Morgan Stanley Capital International (MSCI) All Countries World Index (ACWI) | Standard Life Investments Global Equities Fund (Class D Accumulation Shares) |
| BDO JAPAN EQUITY INDEX FEEDER FUND | Japan | JPX-Nikkei Index 400 | JPX-Nikkei Index 400 Exchange Traded Fund |
| BDO US EQUITY FEEDER FUND | US | Russell 3000 Growth Index | Wells Fargo (Lux) Worldwide Fund U.S. All Cap Growth Fund (Class I Accumulating USD Share Class) |
| BPI Catholic Values Global Equity Feeder Fund | Global | MSCI All Country World Index | World Equity Fund (UCITS) |
| BPI European Equity Feeder Fund | Europe | MSCI Europe Index | Wellington Strategic European Equity Fund USD S Accumulating Unhedged |
| BPI Invest US Equity Index Feeder Fund Class P (PHP Class) | US | S&P® 500 index | SPDR S&P 500 ETF Trust |
| BPI US Dollar Income Feeder Fund | US | 35% MSCI World Index (USD Hedged), 5% MSCI Emerging Markets Index (Unhedged), 25% Bloomberg Barclays Global Aggregate Corporate Index (USD Hedged), 15% Bloomberg Barclays Global High Yield Index (USD Hedged), and 20% FTSE World Government Bond 10+ Years Index (USD Hedged) | United Income Focus Trust |
| BPI US Equity Index Feeder Fund | US | S&P® 500 index | SPDR S&P 500 ETF Trust |
| CTBC Bank – ATRAM Philippine Balanced Feeder Fund | Philippines | 50% PSEi & 50% BPI Philippine Government Bond Index | ATRAM Philippine Balanced Fund |
| CTBC Bank – Sun Life Philippine Stock Index Feeder Fund | Philippines | PSEi | Sun Life Philippine Stock Index Feeder Fund |
| EastWest PhilEquity Feeder Fund | Philippines | Philippine Stock Exchange Index | PhilEquity Fund, Inc |
| EastWest PhilEquity Institutional Feeder Fund | Philippines | Philippine Stock Exchange Index | |
| EastWest S&P 500 Index Equity Feeder Fund | US | S&P® 500 index | iShares Core S&P 500 ETF |
| Manulife American Growth Equity Feeder Fund (Php Unhedged Class A) | US | S&P 500 Index | Manulife Global Fund – U.S. Equity Fund |
| Manulife American Growth Equity Feeder Fund (USD Class A) | US | S&P 500 Index | Manulife Global Fund – U.S. Equity Fund |
| Manulife Asia Dynamic Bond Feeder Fund (PHP Unhedged Class A) | Asia | 50% JP Morgan Emerging Local Markets Index Plus (Asia) + 50% JP Morgan Asia Credit Index (USD) | Manulife Global Fund – Asia Total Return Fund |
| Manulife Asia Dynamic Bond Feeder Fund (USD Class A) | Asia | 50% JP Morgan Emerging Local Markets Index Plus (Asia) + 50% JP Morgan Asia Credit Index (USD) | Manulife Global Fund – Asia Total Return Fund |
| Manulife Dragon Growth Equity Feeder Fund (PHP Unhedged Class A) | China | MSCI Zhong Hua Index | Manulife Global Fund – Dragon Growth Fund |
| Manulife Dragon Growth Equity Feeder Fund (USD Class A) | China | MSCI Zhong Hua Index | Manulife Global Fund – Dragon Growth Fund |
| Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class A) | Global | 50% BoFA Merrill Lynch Fixed Rate Preferred Securities Index + 50% BoFA Merrill Lynch US Capital Securities Index | Manulife Global Fund – Preferred Securities Income Fund |
| Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class I) | Global | 50% BoFA Merrill Lynch Fixed Rate Preferred Securities Index + 50% BoFA Merrill Lynch US Capital Securities Index | Manulife Global Fund – Preferred Securities Income Fund |
| Manulife Global Preferred Income Feeder Fund (USD Class A) | Global | 50% BoFA Merrill Lynch Fixed Rate Preferred Securities Index + 50% BoFA Merrill Lynch US Capital Securities Index | Manulife Global Fund – Preferred Securities Income Fund |
| Manulife Global Preferred Income Feeder Fund (USD Class I) | Global | 50% BoFA Merrill Lynch Fixed Rate Preferred Securities Index + 50% BoFA Merrill Lynch US Capital Securities Index | Manulife Global Fund – Preferred Securities Income |
| Maybank Tiger Dollar Bond Feeder Fund | Philippines | 95% Bloomberg Barclays EM Asia USD Credit Philippines + 5% 30-day USD Dep Rate | Sun Life Prosperity Dollar Abundance Fund |
| Maybank Tiger Peso Bond Feeder Fund | Philippines | 95% Bloomberg Sovereign Bond Index 1 to 5 Year + 5% 30-day SSA | Sun Life Prosperity Bond Fund |
| Maybank Tiger Peso Money Market Feeder Fund | Philippines | 30-day Special Savings Rate General Average (PSAVAVE Index) | Sun Life Prosperity Money Market Fund |
| Metro Aspire Balanced Feeder Fund | Philippines | 60% Philippine Stock Exchange Index and 40% Markit iBoxx ALBI Philippines 1-5 | Metro Balanced Fund |
| Metro Aspire Bond Feeder Fund | Philippines | Markit iBoxx ALBI Philippines 1-5 | Metro Max-5 Bond Fund |
| Metro Aspire Equity Feeder Fund | Philippines | Philippine Stock Exchange Index | Metro Philippine Equity Index Tracker Fund |
| Metro$ Eurozone Equity Feeder Fund | Europe | MSCI EMU Index | iShares MSCI Eurozone Exchange-traded Fund |
| Metro$ Japan Equity Feeder Fund | Japan | MSCI Daily TR Net Japan (NDDUJN Index) | iShares MSCI Japan Exchange-traded Fund |
| Metro$ US Equity Feeder Fund | US | S&P 500 Index | iShares Core S&P 500 Exchange-traded Fund |
| Metro$ US Investment Grade Corporate Bond Feeder Fund | US | Markit IBOXX USD Liquid Investment Grade Index (IBOXIG Index) | iShares iBOXX \$ Investment Grade Corporate Bond Exchange-traded Fund |
| Metro$ US Investment Grade Corporate Bond Feeder Fund | US | Markit IBOXX USD Liquid Investment Grade Index | iShares iBOXX \$ Investment Grade Corporate Bond Exchange-traded Fund |
| Metro$ World Equity Feeder Fund | Global | MSCI AC World NR | Ninety One Global Strategic Equity Fund |
| PRUInvest USD Global Technology Equity Feeder Fund (Class A) | Global | MSCI AC World Information Technology Communication Services Index | Eastspring Investments Global Technology Fund |
| PRUInvest USD Global Technology Equity Feeder Fund (Class I) | Global | MSCI AC World Information Technology Communication Services Index | Eastspring Investments Global Technology Fund |
| PRUInvest USD High Yield Asian Bond Feeder Fund (Class A) | Asia | JACI Non-Investment Grade Index | Eastspring Investments Asian High Yield Bond Fund |
| PRUInvest USD High Yield Asian Bond Feeder Fund (Class I) | Asia | JACI Non-Investment Grade Index | Eastspring Investments Asian High Yield Bond Fund |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class A) | Asia Pacific | MSCI AC Asia Pacific ex Japan Total Index, net dividends in USD | MUFG Asia Pacific ex Japan Equity Stable Growth Fund |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class B) | Asia Pacific | MSCI AC Asia Pacific ex Japan Total Index, net dividends in USD | MUFG Asia Pacific ex Japan Equity Stable Growth Fund |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class F) | Asia Pacific | MSCI AC Asia Pacific ex Japan Total Index, net dividends in USD | MUFG Asia Pacific ex Japan Equity Stable Growth Fund |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class A) | Global | FTSE Global All Cap Index | Vanguard Total World Stock ETF. Target market is retail investors |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class B) | Global | FTSE Global All Cap Index | Vanguard Total World Stock ETF. Target market is institutional investors. |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class F) | Global | FTSE Global All Cap Index | Vanguard Total World Stock ETF. Target market is high-net worth individuals. |
| SB US EQUITY INDEX FEEDER FUND (Class A) | US | CRSP US Total Market Index | Vanguard Total Stock Market ETF. Target market is retail investors. |
| SB US EQUITY INDEX FEEDER FUND (Class B) | US | CRSP US Total Market Index | Vanguard Total Stock Market ETF. Target market is insitutional investors. |
| SB US EQUITY INDEX FEEDER FUND (Class F) | US | CRSP US Total Market Index | Vanguard Total Stock Market ETF. Target market is high-net worth individuals. |
| Sterling Bank Philequity Feeder Fund | Philippines | Philequity Feeder Fund Inc. | |
| Sun Life Prosperity World Equity Index Feeder Fund, Inc. | Global | 95% MSCI ACWI (PHP Terms) + 5% 30-day USD Dep Rate | SPDR MSCI All Country World Index UCITS Exchange Traded Fund |
Features and fees of feeder funds
A feeder fund is structured in the same way as UITF or mutual funds.
NAVPU or NAVPS
Investors would receive a number of shares or units of participation that correspond to the capital that they commit. This is determined through net asset value per unit (NAVPU) or net asset value per share (NAVPS).
NAVPU or NAVPS is the worth of the entire fund at the level of each stock or unit. It is obtained by deducting all debts and liabilities from the worth of all assets, and then divide the result by the number of stocks or units that are issued. Its worth is computed usually at the end of each trading day.
In the example below, a fund has 1 million in assets and half a million in liabilities. With the fund value of half a million and total units issued to be 50,000, the NAVPU or the worth of each unit is 10.
And when you redeem your investment to get your money back, NAVPU or NAVPS is also used to know much your gain or loss. More of this in later section.
Starting capital
So when investors start opening an account, they’d be asked to put up the starting capital, which in turn determines how many number of units or shares to be issued. Thus, let’s say that the NAVPU is 10.00 pesos and the starting capital is 25,000 pesos, the number of units issued is 2,500.
| ITEM | AMOUNT |
|---|---|
| Starting Capital | 25,000.00 |
| NAVPU | 10.00 |
| Total issued units | 2,500 |
Some companies allow starting capital for as low 1,000 pesos. Subsequent or additional investment can be as low as that amount too. Others would require much higher amount. Check the fund documents such as fun facts, prospectus, or key information and investment disclosures (KIIDS) or contact the company for the updated info.
Feeder fund fees
Fees are assessed for various purposes.
- Sales load
- Exit fee
- Management or trust fee
Sales load is charged only when you’re investing in a mutual fund. UITFs don’t have sales load. It is deducted from and represents as a percentage of the capital (whether starting or subsequent investment) that goes to the representative or agent that facilitated the opening of the account. This can be front-end, which is charged at the opening of the account, or back-end, which is charged when the redemption is done. So for instance, Sun Life Prosperity World Equity Index Feeder Fund, Inc. charges 2% (front-end) or 5% (back-end) fee.
Exit fee is the charge when investors redeem their money within the specified period of time called holding period, and not all funds charge an exit fee. The holding period is counted from the day the account is opened, and it can range from as short as 7 days to as long as 180 days.
The exit fee can be a percentage of the redeemed amount or any income derived. Some companies have fixed minimum exit fee.
Management or trust fee is again a percentage that is deducted from the total net value of the entire fund. Investors don’t pay this upfront unlike sales load or out of their redeemed amount like the exit fee. Instead, it is included in the computation of the NAVPU or NAVPS. The lesser the management or trust fee, the better the value of NAVPU or NAVPS.
Other fees include custodian fees, external auditor fees, transaction fees, etc. For more information, always check the fund’s fact sheet, prospectus, declaration of trust, or KIIDS (key information and investment disclosure).
| FUND NAME | OPEN | ADD | TRUST FEE | HOLDING PERIOD | EXIT FEE |
|---|---|---|---|---|---|
| ATRAM Asia Equity Opportunity Feeder Fund | 1,000 | 1,000 | 0.95% p.a. | None | none |
| ATRAM Emerging Markets Bond Feeder Fund | USD 1,000 | USD 500 | 0.65% | None | None |
| ATRAM Emerging Markets Equity Opportunity Feeder Fund | USD 1,000 | USD 500 | 0.95% | None | None |
| ATRAM European Equity Opportunity Feeder Fund | USD 1,000 | USD 500 | 0.91% | None | None |
| ATRAM Global Allocation Feeder Fund | USD 1,000 | USD 500 | 0.90% | None | None |
| ATRAM Global Bond Income Feeder Fund | 1,000 | 1,000 | 0.65% p.a. | None | none |
| ATRAM Global Consumer Trends Feeder Fund (PHP Unit Class) | 1,000 | 1,000 | 0.93% | None | None |
| ATRAM Global Dividend Feeder Fund | 1,000 | 1,000 | 0.90% p.a. | None | none |
| ATRAM Global Equity Opportunity Feeder Fund | USD 1,000 | USD 500 | 0.91% | None | None |
| ATRAM Global Financials Feeder Fund | 1,000 | 1,000 | 0.90% p.a. | None | none |
| ATRAM Global Multi-Asset Income Feeder Fund (PHP Unit Class) | 1,000 | 1,000 | 0.95% | None | None |
| ATRAM Global Technology Feeder Fund | 1,000 | 1,000 | 0.95% | None | none |
| ATRAM Global Total Return Bond Feeder Fund | USD 1,000 | USD 500 | 0.65% | None | None |
| ATRAM Global Multi-Asset Income Feeder Fund (USD Unit Class) | 1,000 | 1,000 | 0.95% | None | None |
| ATRAM US Equity Opportunity Feeder Fund | USD 1,000 | USD 500 | 0.90% | None | None |
| ATRAM US Multi-Asset Income Feeder Fund (PHP Unit Class) | 1,000 | 1,000 | 0.95% | None | None |
| BDO CHINA EQUITY FEEDER FUND | USD 500 | USD 500 | 1.00% | None | None |
| BDO DEVELOPED MARKETS PROPERTY INDEX FEEDER FUND | USD 500 | USD 500 | 0.50% | None | None |
| BDO EUROPE EQUITY FEEDER FUND | USD 500 | USD 500 | 1.00% | None | None |
| BDO GLOBAL EM EQUITY INDEX FEEDER FUND | USD 500 | USD 500 | 0.50% | None | None |
| BDO GLOBAL EQUITY INDEX FEEDER FUND | USD 500 | USD 500 | 0.50% | None | None |
| BDO GLOBAL EQUITY SELECT FEEDER FUND | USD 500 | USD 500 | 1.00% | None | None |
| BDO JAPAN EQUITY INDEX FEEDER FUND | JPY 200,000 | JPY 200,000 | 0.50% | None | None |
| BDO US EQUITY FEEDER FUND | USD 500 | USD 500 | 1.00% | None | None |
| BPI Catholic Values Global Equity Feeder Fund | 100,000 | 50,000 | 0.50% p.a. | None | None |
| BPI European Equity Feeder Fund | USD 1,000 | USD 500 | 0.75% | None | None |
| BPI Invest US Equity Index Feeder Fund Class P (PHP Class) | 50,000 | 10,000 | 0.75% | None | None |
| BPI US Dollar Income Feeder Fund | USD 1,000 | USD 500 | 1% | 180 days | 1% |
| BPI US Equity Index Feeder Fund | 50,000 | 10,000 | 0.75% | None | None |
| CTBC Bank – ATRAM Philippine Balanced Feeder Fund | 10,000 | 10,000 | 1.00% | 30 calendar | 0.50% |
| CTBC Bank – Sun Life Philippine Stock Index Feeder Fund | 10,000 | 10,000 | 1.00% | 30 calendar days | 1.00% |
| EastWest PhilEquity Feeder Fund | 10,000 | 1,000 | 1.00% per annum | 30 calendar | PHP500 or 0.25% of the redemption proceeds whichever is higher |
| EastWest PhilEquity Institutional Feeder Fund | 10,000 | 1,000 | 0.25% p.a. of the fund’s market value | 30 calendar | Early redemption fee of Php 500 or 0.25% on redeemed amount, whichever is higher |
| EastWest S&P 500 Index Equity Feeder Fund | USD 500 | USD 200 | 0.50% | 30 calendar days | USD 10 or 0.25% of the redemption amount, whichever is higher |
| Manulife American Growth Equity Feeder Fund (Php Unhedged Class A) | 5,000 | 5,000 | 1.75% as a % p.a. of the NAV | 30 calendar | 1.00% as a % of the amount withdrawn |
| Manulife American Growth Equity Feeder Fund (USD Class A) | USD 100 | USD 100 | 1.75% | 30 days | 1% |
| Manulife Asia Dynamic Bond Feeder Fund (PHP Unhedged Class A) | 5,000 | 5,000 | 1.50% as a % p.a. of the NAV | 30 calendar | 1.00% as a % of the amount withdrawn |
| Manulife Asia Dynamic Bond Feeder Fund (USD Class A) | USD 100 | USD 100 | 1.50% | 30 days | 1% |
| Manulife Dragon Growth Equity Feeder Fund (PHP Unhedged Class A) | 5,000 | 5,000 | 1.75% as a % p.a. of the NAV | 30 calendar | 1.00% as a % of the amount withdrawn |
| Manulife Dragon Growth Equity Feeder Fund (USD Class A) | USD 100 | USD 100 | 1.75% | 30 days | 1% |
| Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class A) | 50,000 | 5,000 | 1.75% as a % p.a. of the NAV | 30 calendar | 1.00% as a % of the amount withdrawn |
| Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class I) | 50,000 | 5,000 | 1.75% as a % p.a. of the NAV | 30 calendar | 1.00% as a % of the amount withdrawn |
| Manulife Global Preferred Income Feeder Fund (USD Class A) | USD 1,000 | USD 100 | 1.75% | 30 days | 1% |
| Manulife Global Preferred Income Feeder Fund (USD Class I) | USD 1,000 | USD 100 | 1.75% | 30 calendar days | 1% |
| Maybank Tiger Dollar Bond Feeder Fund | US$ 1,000 | US$ 200 | 0.50% | None | None |
| Maybank Tiger Peso Bond Feeder Fund | 10,000 | 1,000 | 0.50% p.a. | None | None |
| Maybank Tiger Peso Money Market Feeder Fund | 10,000 | 1,000 | 0.25% p.a. | 7 banking | 0.25% of redemption proceeds |
| Metro Aspire Balanced Feeder Fund | 5,000 | 1,000 | None | None | None |
| Metro Aspire Bond Feeder Fund | 5,000 | 1,000 | None | None | None |
| Metro Aspire Equity Feeder Fund | 5,000 | 1,000 | None | None | None |
| Metro$ Eurozone Equity Feeder Fund | USD 500 | USD 100 | 0.75% | 7 calendar days | 50% of income on redeemed amount |
| Metro$ Japan Equity Feeder Fund | USD 500 | USD 100 | 0.75% | 7 calendar days | 50% of income on redeemed amount |
| Metro$ US Equity Feeder Fund | USD 500 | USD 100 | 0.75% | 7 calendar days | 50% of income on redeemed amount |
| Metro$ US Investment Grade Corporate Bond Feeder Fund | USD 500 | USD 100 | 0.50% | 7 calendar days | 50% of income on redeemed amount |
| Metro$ US Investment Grade Corporate Bond Feeder Fund | USD 500 | USD 100 | 0.50% | 7 calendar days | 50% of income on redeemed amount |
| Metro$ World Equity Feeder Fund | USD 500 | USD 100 | 1% | 7 calendar days | 50% of income on redeemed amount |
| PRUInvest USD Global Technology Equity Feeder Fund (Class A) | USD 1,000 | USD 1,000 | 1.75% | 30 business days | 0.50% |
| PRUInvest USD Global Technology Equity Feeder Fund (Class I) | USD 1,000 | USD 1,000 | 0.88% | 30 business days | 0.50% |
| PRUInvest USD High Yield Asian Bond Feeder Fund (Class A) | USD 1,000 | USD 1,000 | 1.38% | 30 business days | 0.50% |
| PRUInvest USD High Yield Asian Bond Feeder Fund (Class I) | USD 1,000 | USD 1,000 | 0.69% | 30 business days | 0.50% |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class A) | USD1,000 | USD500 | 1.25% | None | None |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class B) | USD5,000 | USD1,000 | 0.90% | None | None |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class F) | USD5,000 | USD1,000 | 0.90% | None | None |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class A) | USD1,000 | USD500 | 0.64% | None | None |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class B) | USD5,000 | USD1,000 | 0.44% | None | None |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class F) | USD5,000 | USD1,000 | 0.44% | None | None |
| SB US EQUITY INDEX FEEDER FUND (Class A) | USD1,000 | USD500 | 0.71% | None | None |
| SB US EQUITY INDEX FEEDER FUND (Class B) | USD5,000 | USD1,000 | 0.51% | None | None |
| SB US EQUITY INDEX FEEDER FUND (Class F) | USD5,000 | USD1,000 | 0.51% | None | None |
| Sterling Bank Philequity Feeder Fund | 5,000 | 1,000 | 1.00% p.a. | 30 calendar | 0.50% of the net proceeds |
| Sun Life Prosperity World Equity Index Feeder Fund, Inc.* | 50,000 | 10,000 | 1% | 30 days | 1% |
*Sun Life Prosperity World Equity Index Feeder Fund, Inc has sales load of up to 2% front-end or up to 5% back-end
Benefits of feeder funds
What are the pros and cons of feeder funds? What are their advantages?
Passive income
When returns are positive, they can be a source of alternative passive income.
Quicker option
For people wanting exposure to foreign securities, they can be a quicker option. Having an account approved by a stock broker for non-US citizens, for instance, would take weeks and even months according to end-user reports. And that is only particular to buying and selling US stocks. What about trading stocks from China, Japan, Europe and Asia?
Easier way of investing
Investing in them requires less paperwork and less legwork involved. So it may appeal to people who lead busy lives but would still want to grow their money in ways other than trading domestic stocks and bonds.
Convenient
The company that offer feeder funds is responsible in complying to rules on areas of taxes, restrictions, treaties, and other such terms when dealing with securities from other countries. And this can be convenient to investors.
Variety of choices
There is wide variety of choices for investors from all walks of life and different risk profile. People can invest in several currencies, in various markets across the globe, and in target funds that have different underlying assets.
Regulation
They are to subject to regulatory oversight by the Securities and Exchange Commission or Bangko Sentral ng Pilipinas, so they’re evaluated, reviewed, and deemed safe to be offered to the public.
Liquidity
Investors can buy and sell their feeder fund anytime, and they can be assured that they can get their money back at the moment that they decide they would do so.
Diversified portfolio
They can provide access and add diversity to investment portfolio. This can be advantageous in instances when there is opportunity to reap higher gains especially when the domestic capital market is not doing well.
Disadvantages of the feeder funds
There are downsides to them as well.
- Charges. One particular fund will have either a front-end or back-end sales load, which you can avoid by looking for those without it.
- Expensive fees. No doubt that it is cheaper to subscribe to the target funds directly rather than go through feeder funds. For instance, one target fund has an expense ratio of 0.03%, but the feeder fund charges 0.50% trust fee before other fees such as custodian fees, external auditor fees, and other charges.
- Retail investors may end up paying more. In multi-class funds, retail investors might be charged higher trust fees compared to institutional and high net worth investors. With that said, they may be allowed to start with lower capital than the latter.
- Less control. Investors do not exercise control on the choice of the target fund and its underlying assets.
- Subject to exit fee. While there are several that do not have any exit fee, others are charging exit fee if redemption is made within the minimum holding period.
- Unguaranteed returns. Return on investment is not guaranteed and unpredictable. The investors absorb such risks such as capital loss, etc.
Best feeder funds in the Philippines of 2020
Below is the list of the top performing feeder funds in 2020. Data is accurate as of the last trading day of December 2020 for mutual funds and December 28 for UITFs.
Remember though that this is in the past, and past data does not guarantee or reflect future returns. You can also see classification of their underlying assets, currency, and type.
| FUND NAME | CLASSIFICATION | CURRENCY | TYPE | 1 YEAR RETURN |
|---|---|---|---|---|
| ATRAM US Equity Opportunity Feeder Fund | Equity | Dollar | UITF | 41.63% |
| BDO CHINA EQUITY FEEDER FUND | Equity | Dollar | UITF | 38.32% |
| Manulife Dragon Growth Equity Feeder Fund (USD Class A) | Equity | Dollar | UITF | 34.30% |
| PRUInvest USD Global Technology Equity Feeder Fund (Class I) | Equity | Dollar | UITF | 33.75% |
| ATRAM Global Technology Feeder Fund | Equity | Peso | UITF | 33.62% |
| PRUInvest USD Global Technology Equity Feeder Fund (Class A) | Equity | Dollar | UITF | 32.79% |
| BDO EUROPE EQUITY FEEDER FUND | Equity | Dollar | UITF | 32.33% |
| Manulife Dragon Growth Equity Feeder Fund (PHP Unhedged Class A) | Equity | Peso | UITF | 27.43% |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class F) | Equity | Dollar | UITF | 24.85% |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class A) | Equity | Dollar | UITF | 24.42% |
| Manulife American Growth Equity Feeder Fund (USD Class A) | Equity | Dollar | UITF | 19.17% |
| ATRAM Global Allocation Feeder Fund | Balanced | Dollar | UITF | 18.94% |
| SB US EQUITY INDEX FEEDER FUND (Class F) | Index | Dollar | UITF | 17.78% |
| SB US EQUITY INDEX FEEDER FUND (Class B) | Index | Dollar | UITF | 17.78% |
| SB US EQUITY INDEX FEEDER FUND (Class A) | Index | Dollar | UITF | 17.55% |
| BPI US Equity Index Feeder Fund | Index | Dollar | UITF | 15.42% |
| ATRAM Emerging Markets Equity Opportunity Feeder Fund | Equity | Dollar | UITF | 15.09% |
| BDO GLOBAL EQUITY INDEX FEEDER FUND | Index | Dollar | UITF | 14.90% |
| BDO GLOBAL EM EQUITY INDEX FEEDER FUND | Index | Dollar | UITF | 13.22% |
| Manulife American Growth Equity Feeder Fund (Php Unhedged Class A) | Equity | Peso | UITF | 13.19% |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class F) | Index | Dollar | UITF | 12.80% |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class A) | Index | Dollar | UITF | 12.58% |
| BPI Invest US Equity Index Feeder Fund Class P (PHP Class) | Index | Peso | UITF | 9.54% |
| BPI European Equity Feeder Fund | Equity | Dollar | UITF | 9.32% |
| ATRAM Global Equity Opportunity Feeder Fund | Equity | Dollar | UITF | 9.20% |
| ATRAM US Multi-Asset Income Feeder Fund (PHP Unit Class) | Balanced | Peso | UITF | 8.92% |
| BPI Catholic Values Global Equity Feeder Fund | Equity | Peso | UITF | 8.63% |
| Manulife Asia Dynamic Bond Feeder Fund (USD Class A) | Bond | Dollar | UITF | 7.46% |
| BDO US EQUITY FEEDER FUND | Equity | Dollar | UITF | 6.77% |
| Metro Aspire Bond Feeder Fund | Bond | Peso | UITF | 5.86% |
| BDO JAPAN EQUITY INDEX FEEDER FUND | Index | Yen | UITF | 5.83% |
| BDO GLOBAL EQUITY SELECT FEEDER FUND | Equity | Dollar | UITF | 4.73% |
| CTBC Bank – ATRAM Philippine Balanced Feeder Fund | Balanced | Peso | UITF | 3.87% |
| Maybank Tiger Peso Bond Feeder Fund | Bond | Peso | UITF | 3.54% |
| PRUInvest USD High Yield Asian Bond Feeder Fund (Class I) | Bond | Dollar | UITF | 3.08% |
| ATRAM Global Financials Feeder Fund | Equity | Peso | UITF | 2.56% |
| PRUInvest USD High Yield Asian Bond Feeder Fund (Class A) | Bond | Dollar | UITF | 2.45% |
| Maybank Tiger Peso Money Market Feeder Fund | Money Market | Peso | UITF | 2.28% |
| Manulife Asia Dynamic Bond Feeder Fund (PHP Unhedged Class A) | Bond | Peso | UITF | 2.10% |
| Maybank Tiger Dollar Bond Feeder Fund | Bond | Dollar | UITF | 1.00% |
| Manulife Global Preferred Income Feeder Fund (USD Class A) | Balanced | Dollar | UITF | 0.34% |
| ATRAM Global Consumer Trends Feeder Fund (PHP Unit Class) | Equity | Peso | UITF | 0.00% |
| ATRAM Global Multi-Asset Income Feeder Fund (USD Unit Class) | Balanced | Dollar | UITF | 0.00% |
| BDO DEVELOPED MARKETS PROPERTY INDEX FEEDER FUND | Index | Dollar | UITF | 0.00% |
| EastWest PhilEquity Institutional Feeder Fund | Equity | Peso | UITF | 0.00% |
| EastWest S&P 500 Index Equity Feeder Fund | Index | Dollar | UITF | 0.00% |
| Manulife Global Preferred Income Feeder Fund (USD Class I) | Balanced | Dollar | UITF | 0.00% |
| Metro$ Eurozone Equity Feeder Fund | Equity | Dollar | UITF | 0.00% |
| Metro$ Japan Equity Feeder Fund | Equity | Dollar | UITF | 0.00% |
| Metro$ US Equity Feeder Fund | Equity | Dollar | UITF | 0.00% |
| Metro$ US Investment Grade Corporate Bond Feeder Fund | Equity | Dollar | UITF | 0.00% |
| Metro$ World Equity Feeder Fund | Equity | Dollar | UITF | 0.00% |
| SB GLOBAL EQUITY INDEX FEEDER FUND (Class B) | Index | Dollar | UITF | 0.00% |
| ATRAM European Equity Opportunity Feeder Fund | Equity | Dollar | UITF | -1.03% |
| Metro Aspire Balanced Feeder Fund | Balanced | Peso | UITF | -1.82% |
| ATRAM Global Dividend Feeder Fund | Equity | Peso | UITF | -2.22% |
| ATRAM Global Bond Income Feeder Fund | Bond | Peso | UITF | -2.47% |
| Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class I) | Balanced | Peso | UITF | -3.26% |
| Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class A) | Balanced | Peso | UITF | -4.77% |
| ATRAM Emerging Markets Bond Feeder Fund | Bond | Dollar | UITF | -5.10% |
| ATRAM Asia Equity Opportunity Feeder Fund | Equity | Peso | UITF | -5.40% |
| SB ASIA PACIFIC EQUITY FEEDER FUND (Class B) | Equity | Dollar | UITF | -5.96% |
| ATRAM Global Multi-Asset Income Feeder Fund (PHP Unit Class) | Balanced | Peso | UITF | -6.77% |
| BPI US Dollar Income Feeder Fund | Balanced | Dollar | UITF | -8.46% |
| EastWest PhilEquity Feeder Fund | Equity | Peso | UITF | -9.05% |
| CTBC Bank – Sun Life Philippine Stock Index Feeder Fund | Index | Peso | UITF | -9.05% |
| Metro Aspire Equity Feeder Fund | Equity | Peso | UITF | -9.11% |
| Sterling Bank Philequity Feeder Fund | Equity | Peso | UITF | -9.62% |
| ATRAM Global Total Return Bond Feeder Fund | Bond | Dollar | UITF | -11.38% |
| Sun Life Prosperity World Equity Index Feeder Fund, Inc. | Index | Peso | Mutual fund | n.a. |
How much can you earn from investing in feeder funds?
As you can see from the table above, the feeder fund with the best ROI in 2020 is ATRAM US Equity Opportunity Feeder Fund. It gave its investors 41.63% gain. Using that as a yardstick, see how a one-time investment fares in 10 years below of varying growth from 4% to 40%.
Again, it is crucial to consider that this is only a math estimate. Actual results will differ, and no one fund is guaranteed to give spectacular gains or any gains at all consistently in the next few years.
Also, fees and charges are not taken into account.
| YEAR | CAPITAL | 4% | 8% | 12% | 20% | 30% | 40% |
|---|---|---|---|---|---|---|---|
| 1 | 1,000,000 | 1,040,000 | 1,080,000 | 1,120,000 | 1,200,000 | 1,300,000 | 1,400,000 |
| 2 | 1,081,600 | 1,166,400 | 1,254,400 | 1,440,000 | 1,690,000 | 1,960,000 | |
| 3 | 1,124,864 | 1,259,712 | 1,404,928 | 1,728,000 | 2,197,000 | 2,744,000 | |
| 4 | 1,169,859 | 1,360,489 | 1,573,519 | 2,073,600 | 2,856,100 | 3,841,600 | |
| 5 | 1,216,653 | 1,469,328 | 1,762,342 | 2,488,320 | 3,712,930 | 5,378,240 | |
| 6 | 1,265,319 | 1,586,874 | 1,973,823 | 2,985,984 | 4,826,809 | 7,529,536 | |
| 7 | 1,315,932 | 1,713,824 | 2,210,681 | 3,583,181 | 6,274,852 | 10,541,350 | |
| 8 | 1,368,569 | 1,850,930 | 2,475,963 | 4,299,817 | 8,157,307 | 14,757,891 | |
| 9 | 1,423,312 | 1,999,005 | 2,773,079 | 5,159,780 | 10,604,499 | 20,661,047 | |
| 10 | 1,480,244 | 2,158,925 | 3,105,848 | 6,191,736 | 13,785,849 | 28,925,465 | |
| Total | 1,480,244 | 2,158,925 | 3,105,848 | 6,191,736 | 13,785,849 | 28,925,465 |
And here is how an annual investment of Php 100,000 would grow.
| YEAR | CAPITAL | 4% | 8% | 12% | 20% | 30% | 40% |
|---|---|---|---|---|---|---|---|
| 1 | 100,000 | 104,000 | 108,000 | 112,000 | 120,000 | 130,000 | 140,000 |
| 2 | 200,000 | 212,160 | 224,640 | 237,440 | 264,000 | 299,000 | 336,000 |
| 3 | 300,000 | 324,646 | 350,611 | 377,933 | 436,800 | 518,700 | 610,400 |
| 4 | 400,000 | 441,632 | 486,660 | 535,285 | 644,160 | 804,310 | 994,560 |
| 5 | 500,000 | 563,298 | 633,593 | 711,519 | 892,992 | 1,175,603 | 1,532,384 |
| 6 | 600,000 | 689,829 | 792,280 | 908,901 | 1,191,590 | 1,658,284 | 2,285,338 |
| 7 | 700,000 | 821,423 | 963,663 | 1,129,969 | 1,549,908 | 2,285,769 | 3,339,473 |
| 8 | 800,000 | 958,280 | 1,148,756 | 1,377,566 | 1,979,890 | 3,101,500 | 4,815,262 |
| 9 | 900,000 | 1,100,611 | 1,348,656 | 1,654,874 | 2,495,868 | 4,161,950 | 6,881,366 |
| 10 | 1,000,000 | 1,248,635 | 1,564,549 | 1,965,458 | 3,115,042 | 5,540,535 | 9,773,913 |
| Total | 1,000,000 | 1,248,635 | 1,564,549 | 1,965,458 | 3,115,042 | 5,540,535 | 9,773,913 |
How to invest in feeder funds
Investing in feeder funds can be a pretty straightforward process and easy. It is like opening a deposit account in a bank.
- Do your due diligence. There are over 70 funds that you can choose from as discussed above. Thus, see which ones that fit you in terms of exposure to a specific market, being able to subscribe in different currencies and securities.
- Decide which UITF company or mutual fund company. Maybe you don’t need to look for a company that you’re doing business for the first time. See if the bank that you have a savings account with offer them. In this way, it can be convenient for you to deal with one institution with various services.
- Inquire too if they offer an online account for monitoring.
- Would you be investing consistently? Then ask if it is possible that your bank account gets automatically deducted with a specific amount to be put to your investment. Some banks offer such facility. For instance, BDO has the Easy Investment Plan (EIP), BPI has Regular Subscription Plan (RSP), Philequity has an Auto-Investment arrangement, etc.
- Once you’re able to determine the company and the specific fund, you can then know how much starting capital you would need.
- Prepare valid identification card and a tax identification number.
- Open the account. You an either schedule an appointment ahead of time or you can just walk in during office hours.
- Monitor account.
In order to make the most of your investment, here a couple of tips.
- Just because feeder funds are new doesn’t necessarily mean you should subscribe to one. Check your financial status and see if this is really something that you need in your present situation.
- Make a comparison. Is investing in a feeder fund whose target fund is trading equities in United States, other countries, or regions the best fit for you? Would you be missing out on the income opportunity that the local stock exchange can give?
- Tie your investment with a specific financial goal. Are you buying a house? Is this fund part of your wedding preparation? What is the timeline of the goal? In this way, you have not only personal reason, it would also guide you in knowing which fund is best for you.
- Investing have risks. Returns are not guaranteed. How much capital loss are you willing to tolerate?
- If you can, go for lower fees. The lower the fees, the better your returns in the long run. Check if index funds would be a good fit for you.
How to compute earnings from feeder funds
So how do you compute your gain (or loss) from feeder funds? You would just need three things: your total capital, the number of units or shares issued to you, exit fee (if there is any) and the current NAVPU/NAVPS at the time of redemption.
Thus to continue with the example above, let’s say that the total capital is 25,000 pesos, the number of issued units is 2,500, exit fee of 2%, and the current NAVPU is 15.00 pesos.
First, multiply the number of units with the NAVPU. Then, deduct any exit fee to get the total redeemed amount.
| ITEM | AMOUNT |
|---|---|
| Number of units | 2,500 |
| Current NAVPU | 15.00 |
| Total amount | 37,500 |
| Exit fee (2%) | 750.00 |
| Total redeemed amount | 36,750.00 |
In order to compute how much gain (or loss), deduct the original capital from the total redeemed amount. To get the percentage, divide the gain (or loss) with the original capital. In this case, the gain is 11,750 and it represents 47% of the original capital.
| ITEM | AMOUNT |
|---|---|
| Totalredeemed amount | 36,750.00 |
| Capital | 25,000.00 |
| Gain (or Loss) | 11,750.00 |
| % Gain (or Loss) | 47% |
Conclusion
Now that you’ve learned what a feeder fund is, what do you think? Would you be interested enough to subscribe to one? Whatever you do, do not forget to do your due diligence and avoid the Shiny Object Syndrome where you’re enticed to start one just because it is something new to you. It still matters very importantly that you do it because it fits you and your plans for the future.