In comparing returns from PSEi index funds in the Philippines, the right benchmark to use is the PSEi Total Return Index (PSEi TRI). This is particularly true considering none of the PSEi index funds distribute cash dividends. The PSEi TRI accounts for cumulative price returns and cumulative return sof dividends reinvested back into the index, while the PSEi only accounts for price returns. The PSEi TRI was only introduced in 2019, but its history was back-calculated to 2007. Since it’s pretty new, I haven’t found any freely available resource for the PSEi TRI history. I recently came across this article, And the best equity fund is …, from the Philippine Daily Inquirer. This article was written by someone who is selling financial planning products, so not surprisingly, the article did not actually identify any particular index fund. Fortunately, it did provide some numbers for the PSEi TRI.
According to the article, the PSEi and PSEi TRI have the following compounded annual growth rate (CAGR):
| Period (to end 2019) | PSEi cagr (%) | PSEI tri cagr (%) |
|---|---|---|
| 5 years | 1.57 | 3.29 |
| 10 years | 9.86 | 11.40 |
| 12 years | 6.62 | 9.42 |
As expected, the PSEi TRI have higher returns, since it accounts for reinvested dividends. How do the various PSEi index funds compare against the PSEi TRI? Below, I consider only the index funds that have been around for 5 years.
| FUND | TYPE | 12/29/2014 | 12/27/2019 | 5-YEAR CUMULATIVE % | 5-YEAR CAGR (%) |
|---|---|---|---|---|---|
| First Metro ETF | ETF | 103.26 | 117.40 | 13.7 | 2.60 |
| BPI Equity Index Fund | UITF | 97.17 | 105.32 | 8.39 | 1.62 |
| Metro Philippine Equity Index Tracker Fund | UITF | 9.948 | 1.91 | ||
| UnionBank Philippine Equity Index Portfolio | UITF | 104.793847 | 114.179451 | 8.96 | 1.73 |
| Philequity PSE Index Fund | MF | 4.8158 | 5.2235 | 8.47 | 1.63 |
It’s clear from the above table that First Metro ETF, with a 5-year CAGR of 2.60%, outperformed the other funds. This is primarily due to FMETF’s lower fees. However, the article states that the 5-year CAGR of Philippine equity funds, including non-index funds, ranged from -4.52% to 3.15%, and that “the best performing fund was an equity index mutual fund”. I assume this best performing fund has the 3.15% 5-year CAGR. That would be better than FMETF’s performance. Unfortunately, I haven’t been able to identify which fund that is.