“Before, stock picking was more pronounced,” said Sy, who first bought an exchange seat in 1986, the year Philippine dictator Ferdinand Marcos was ousted from office and democracy returned to the island nation. “Now, it’s more liquidity. It’s passive funds that are pushing the market.”
Some investors, most notably Michael Burry of “The Big Short” fame, have responded to the rise of passive investing by making contrarian bets on overlooked small-cap stocks in markets like the U.S., Japan and South Korea.
But in the Philippines, where daily trading amounts to about 0.04% of that in the U.S., liquidity constraints argue for the opposite approach, Sy says.
While the 66-year-old former Philippine exchange chairman hasn’t totally abandoned wagers on smaller companies, they comprise a shrinking proportion of his portfolio. Sy’s top holdings in the Philequity fund as of Sept. 30 were SM Investments Corp., Ayala Land Inc., SM Prime Holdings Inc. and BDO Unibank Inc. -- the four stocks with the biggest weightings in the benchmark index.
“The dilemma today is striking the right balance between big liquid names and small stocks that are quite cheap and offer value,” he said.
Sy’s plan for a new Philequity international fund underscores his evolving strategy. Instead of picking individual stocks for the fund, he intends to make bets on global market trends using macroeconomic analysis.
His securities of choice? Index-tracking exchange traded funds.
This article was provided by Bloomberg News.