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INVESTMENT OPPORTUNITIES AND RISKS

Ramon Magsaysay Award Foundation. Briefing on NGO Investments September 30, 2008 | Ramon Magsaysay Center. INVESTMENT OPPORTUNITIES AND RISKS. Mr. Edmund Go Director, Metrobank Former Treasurer, Citibank Former Treasurer, Metrobank. Objectives:.

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INVESTMENT OPPORTUNITIES AND RISKS

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  1. Ramon Magsaysay Award Foundation Briefing on NGO Investments September 30, 2008 | Ramon Magsaysay Center INVESTMENT OPPORTUNITIES AND RISKS Mr. Edmund Go Director, Metrobank Former Treasurer, Citibank Former Treasurer, Metrobank

  2. Objectives: • Present the various investment alternatives / opportunities available in the money and capital markets. • Discuss the risks inherent in each of these alternatives • Where does one invest during “times like the one we are in today”?

  3. CREDIT (DEFAULT) RISK LIQUIDITY RISK PRICE (MARKET) RISK Issuer, capital, performance, ownership, management, products, rating, etc. Daily volume, market makers, total issue size, etc. Change in interest rates, inflation, monetary and fiscal policy, economic performance RISK FACTORSInvesting in Fixed Income Securities

  4. FOREIGN EXCHANGE (CURRENCY) RISK SOVEREIGN RISK RE INVESTMENT RISK Foreign exchange rates Political, debt levels, trade and current accounts Trend of interest rate (declining) RISK FACTORSInvesting in Fixed Income Securities

  5. Bank Deposits

  6. Phil. Government: Treasury Bills (TBills), Retail Treasury Bonds (RTBs) & Fixed Rate Treasury Notes (FXTNs)

  7. Corporate Bond

  8. Bank Issued LTNCD/Lower Tier 2 (LT2)

  9. Republic of the Philippine ($ ROPs)

  10. UITFs and Mutual Funds

  11. Stocks

  12. Assets for Allocation

  13. Investment Objectives • Interest income and capital preservation • Interest income with some capital gains potential. Capital loss, if any, will more often than not be equal to or lower than interest income so that principal will not be impaired • Interest income and capital gains. Principal will be at risk in return for much higher returns

  14. Conservative Portfolio(without Equities) Short Term (1 year <) Securities (20-30%) Cash/ Time Deposit (70-80%)

  15. Conservative Portfolio(with Equities) Fixed Income Securities (3 years <) (25-30%) Cash/ Time Deposit (65-70%) Equities (0-10%)

  16. Moderately Aggressive Portfolio(without Equities) Fixed Income Securities (3 years <) (30-35%) Cash/ Time Deposit (65-75%)

  17. Moderately Aggressive Portfolio(with Equities) Equities (5-15%) Equities (30-40%) Fixed Income Securities (3 years <) (25-35%) Cash/ Time Deposit (50-60%)

  18. SUMMARY: Recommendations • “Cash is King” IF YOU MUST INVEST: • Keep very short and/or reduce duration of existing fixed income investments • Minimum exposure to selected shares preferably to “blue chip stocks” • Place funds with and confine debt instruments to most stable issuers, i.e. Governments and institutions who have least exposure to crisis, i.e. Subprime Mortgages, CDOs, CDS; whose share and debt prices have fallen the least within their industry and whose capital remains strong • Consider buying protection, i.e. option or CDS to hedge existing exposures / investments (again from highly reputable and stable institutions only) • MONITOR value of all investments and financial indicators of counterparties regularly and as often as possible

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