The Philippine Mtual Fund Industry Swot Analysis free essay sample

A financial adviser will be hired the investment company to help choose where to place your money. In relation with his you’ll be having an access a boarder range of investment instruments such as equities, fixed income and real estate. Another, thing mutual fund has a low tolerance on risk through diversification. Finally, an investor whose considering to put his money in mutual fund would be delighted because of its lower transaction costs and minimum capital requirement of Php. 5,000 only. There are a lot of disadvantages that Philippine mutual funds industry is facing. First on the list is that the industry remains small after 41 years. Since the incorporation of the first mutual fund in the country which was Filipinas Mutual Fund at the end of 1998 there were only 15 investment companies participating in the industry with total assets of only 3.   billion. In addition to this there only 14 open-ended companies and only are closed-ended company each having 6000 and 8000 investors respectively. We will write a custom essay sample on   The Philippine Mtual Fund Industry Swot Analysis   or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page There were less than 200 SEC-licensed mutual fund salesmen. Obviously this will affect the operation of the investment companies engaging in mutual funds because the promotional activities is very minimal and so it generate lower income thus affecting the return of the investor. Secondly, the level of accountability reliability of the industry was not that good because out of 222 companies only 50 are generally considered to be truly investment rade companies. Environmental analysis There a lot of external factors that the mutual funds industry of the Philippines had. There may be a number of weaknesses the industry has but still many opportunities can be a tool to help revive the sector. The promulgations of the rules regulation Governing Investment companies under Republic Act 2629 with the support of SEC helped revive the industry after its downfall because of negative things that happen under the leadership of then President Ferdinand Marcos. That’s the point where in th eir investment companies emerged. Republic act 2629 can be redeveloped to help attract more investors in the industry because we need to adapt to the charging pattern of the market. Another thing also to consider is the challenge of ICAP to BSP’s position against alliances between the mutual fund industry and universal banks. It is the right time for the industry to take the risk of having strong relationship with banks and encourage the BSP to support them with its endeavour. It may create a great venue for the both sectors to shape the Philippine financial system. Finally, Personal Equity Retirement Account (PERA) as pattern on Individual Retirement Accounts (IRAS) is seen by the industry to help boost the mutual fund industry in the country. Through PERA accounts, a substantial part of Filipino saving is to be open among financial institutions including mutual fund companies. Aside from that, PERA offers tax incentives so it will be attractive to investors. There were lots of concerns that the industry can’t avoid. First, people were not familiar about mutual funds. One factor that may contribute to this is the fact that funds have very few retail outlets. The distribution channels consist primarily of the offices of the funds themselves. Another thing to consider was that the industry fell victim to a number of scams by some unscrupulous individuals. There came a time that mutual fund industry would become synonymous with the word â€Å"scam†. In addition to that, people preferred bank time deposit s as the most investment tools as they offer a safe guaranteed return compared to mutual funds that do not offer a guaranteed rate of return and more prove to risks. Pre-need plan also dominate the investment sector in the country. Pre-need plan is way better than mutual fund. There are 88 pre-need plan companies with total assets amounting to 78. 8million compared to 15 mutual fund companies with 12million in assets. Aside from that SEC has a minimum eye on preneed plan compared to mutual fund. Finally, the mutual fund industry of the country when compared to other countries is obviously uncompetitive. One factor that may contribute to this is   Philippines has one of the lowest saving rate in Asia of 17% is compared to Malaysia, Hongkong ,India and Thailand with 34%, 30%, 24% and 37% respectively. Strategic Issues and Recommendation Considering the fact that the mutual fund industry in the Philippines is small with only 15 companies and insignificant because people would prefer to invest in other financial instrument like preneed plan and common trust funds and time deposits on banks due to lack of familiarity and negative image it is very obvious that the Philippine mutual fund industry is undeveloped and growing very slowly. In order to help gain the popularity of mutual funds to investor, investment companies should hire more salesman reliable and advertising campaign to help promote their products. Revision of republic Act 2629 should also be implemented. This action should be actively supported by the Investment Company Association of the Philippines (ICAP) and not mutual fund companies alone.   Mutual funds industry should also seek for support of other financial institutions like banks, insurance companies and the like to create alliances and good relationship with each other. One strategy that a company can be used to achieve a sustainable competitive advantage against its rival is to provide a distinctive product or service. PERA accounts may be a great help for the industry to attract more customers. The industry should pursue this bill because it is a possible source of large inflows of capital into the industry.