“Dollar-denominated assets should be favorable when the U.S. dollar exchange rate is strengthening, especially if it is on account of increasing interest rates, as the case is today. The U.S. Federal Reserve has made it clear it is on a path of sustained rate hikes. Until it is convinced that the threat of runaway inflation is completely eradicated, the dollar will remain elevated and reach historic highs,” said Antonio V. Agcaoili, executive vice president and head of treasury of Asia United Bank (AUB), one of the country’s fastest-growing publicly listed banks.

While there is a seasonal influx of overseas Filipino workers’ (OFWs) remittances towards the last quarter of the year, this may not be enough to ease the pressure on the Philippine peso against the greenback, Mr. Agcaoili said, as “the demand for foreign exchange is much bigger than the amount coming from OFWs.”

Thus, local investors in search of higher-yielding assets will be in a good position to load up on U.S. dollar assets, said Andrew Chua, AUB senior vice president and head of trust.

The bank is already seeing pent-up demand for its award-winning AUB Gold Dollar Fund (GDF) which offers retail investors access to the U.S. dollar bond market normally reserved for foreigners and high net worth investors. 

The GDF offers flexibility as returns can be withdrawn any time after the minimum holding period and investors benefit from a team of professional fund managers that will ensure their investments are kept safe as risk and returns are balanced appropriately. The Fund invests in a diversified portfolio of fixed income securities and offers a rate of return equivalent to the rolling yield of the 5-year U.S. Treasury Notes, net of fees.

“With expectations for interest rates to continue to rise in the near term, the GDF’s net asset value (NAV) will remain depressed. However, as prospects for a U.S. economic recession rise, we expect the U.S. Fed to end its hawkish policies soon. This, in turn, will result in a more stable interest rate environment and will allow the fund to accrue at high yields. As such, we see the current situation as a good opportunity for our clients to start accumulating investments in the GDF and expect to reap the benefits from their investments over the next two to three years,” Mr. Chua explained.

Due to the GDF’s consistently stellar performance, AUB was able to sustain its six-year winning streak as the Best Managed Fund in the Dollar Medium-Term Bond Fund category at the CFA Society Philippines’ 2022 Best Managed Fund Awards. A total of 82 funds from 16 investment houses and trust institutions joined the competition.

“Consistency is key. Short- to medium-term volatility amplifies the noise in the market, but with consistent fund management, the long-term performance of the fund will almost always result in positive returns. Having been awarded by the CFA as the Best Medium Term Bond Fund for six years in a row is a solid validation of our fund management capabilities,” said Mr. Chua.