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Promoting the Development of Mutual Funds in the Philippines


Mutual funds and other forms of collective investment schemes (CIS) have been thriving in the country as shown in the increasing amount of assets under management and the growing number of investors. Compared with other ASEAN countries, however, the mutual fund industry is small and shows potential for further growth. Mutual funds are alternative investment products which have the potential to provide higher returns compared to savings deposits. It should be understood, however, that the possibility of higher returns is associated with higher risks, and that investments are not guaranteed by the government unlike savings deposits which are covered by deposit insurance. A vibrant mutual fund market can promote the development of the capital market and increase availability of funds that can support the financing requirements of the economy. Republic Act 2629 or the Investment Company Act governs the creation, regulation, licensing and monitoring of investment companies such as mutual funds in the Philippines. The law, however, is more than 50 years old and despite amendments to its implementing rules and regulations, several studies point to the need to amend the law or craft a new one that would strengthen the regulation of the industry to further improve investor confidence. The current strong macroeconomic fundamentals coupled with optimistic growth forecasts bode well for the prospects of the mutual fund industry. Moreover, the opportunities and risks for greater regional and global integration are important considerations for strengthening the regulatory framework of the industry. This paper looks into the country’s mutual fund industry, its regulation and possible legislative intervention to further promote its development.


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Nov 23, 2014