Banks’ trust assets were up 6.20 percent as of end-third quarter 2020 to P3.048 trillion from P2.870 trillion same period in 2019 with most preferring to be liquid and opting for safer investments during the pandemic.
Based on data from the Bangko Sentral ng Pilipinas (BSP), the 28 financial institutions with trust licenses have higher funds in liquid assets amounting to P1.845 trillion as net financial assets compared to P1.671 trillion same time in 2019.
Deposit in banks, in the meantime, slightly dipped to P841.74 billion versus P849.81 billion of the previous year.
Big banks’ trust departments during the pandemic reduced their investments on financial assets in the first months of the lockdown period to manage their portfolio returns but the BSP said the quality of industry assets continue to be satisfactory. These liquid trust assets are highly marketable securities and deposits in bank.
The industry trust accountabilities as of end-September 2020 rose to P1.386 trillion from P1.161 trillion same period in 2019, with unit investment trust funds (UITFs) which are open-ended pooled trust funds, as the “bright spot” during the uncertain COVID-19 times.
Funds in UITFs increased to P767.96 billion in the third quarter last year from P562.68 billion in 2019.
Rizal Commercial Banking Corp. (RCBC) Trust and Investments Group Head Robert B. Ramos said their UITF clients are choosing the less volatile products such as money market funds and short-term funds.
“It is very intuitive,” said Ramos. “Investors don’t want to take added risks. Thus, they invest in the two,” he noted.
He also said investors’ conservative attitude due to unstable interest rate are making them choose short-term funds to “temporarily park funds to earn reasonable interest income as it can provide a higher potential return than traditional time deposits.”
Ramos said that the “shorter the investment term, the less the impact” and “when the market expects the interest rates to adjust against their position, they buy the shortest possible fixed income asset to manage this price risk.”