April 11, 2018
First Metro Asset Management, Inc. (FAMI), the fund management subsidiary of First Metro Investment Corporation, has officially launched its newest mutual fund, the First Metro Consumer Fund, which tracks the performance of the First Metro Index on MSCI Philippines IMI (First Metro Index). The First Metro Index was developed in partnership with globally renowned index provider MSCI, Inc. and launched in 2017.
FAMI president Augusto Cosio, Jr. said, “The First Metro Index, which we created with MSCI, Inc., is meant to help Filipino investors multiply their investments with the guidance of a benchmark that captures the Philippine consumption-led growth story. With the rollout of the First Metro Consumer Fund, they now have a tangible investment product to go to where they can benefit from the superior returns brought about by the robust Filipino household expenditure pattern.”
The First Metro Consumer Fund is invested in a basket of securities comprising the First Metro Index, which is currently made up of 21 stocks with huge revenue exposure to industries that benefit from the Philippine family consumption expenditure pattern, such as food and beverage manufacturing/processing, fastfood and restaurants, mall development, communications, financial services, tourism, transportation and more.
The back-tested performance of the stock composition of the consumer index over the last 10 years indicates a 454% straight-line return, far greater than that of the Philippine Stock Exchange index (PSEi) at 296% and MSCI IMI at 119%. In terms of price performance, the First Metro Index registered a 27.5% increase in 2017 compared to the 25.11% of the PSEi and 11.4% of MSCI EPHE for the same year.
Cosio said, “The economic growth we’ve been experiencing relies heavily on consumer spending, which makes up about 74% of the Philippine GDP. Investing in the First Metro Consumer Fund is essentially investing in that major driver of our country’s growth. What will support this consumption-led growth is our very young population, or what we call our ‘demographic dividend’, who have high disposable income. With the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, salaried workers receive even more take-home pay which means more spending power for the Filipino consumers.”
Besides its high growth potential, the First Metro Consumer Fund, as an index mutual fund, is passively-managed. It provides broad market exposure, low operating expenses, and low portfolio turnover.
Passive investing has been gaining popularity among individuals, institutions, and financial advisers worldwide due to passive funds’ superior return and greater portfolio efficiency. In the U.S., passive fund inflows increased by 60% to US$684.6 billion in 2017 compared to US$428.7 in 2016. The same trend can be observed in Asia and in Europe. In 2017, passive funds already accounted for almost 18% of the total US$ 68 trillion global equity market capitalization.
Cosio added, “No company in the Philippines can attest to the better performance of passive funds other than the First Metro Group. We pioneered the creation of the first-ever, passively-managed, exchange-traded fund in the country, the First Metro Exchange-Traded Fund (FMETF). The FMETF, which closely mirrors the PSEi’s performance, had a record 26.34% return in 2017, besting the 21.73% average return of managed stock funds. With the First Metro Consumer Fund, we hope to give Filipino investors a more diverse choice of index mutual funds.”