PHILANTHROPIC organizations are encouraged to have careful investment planning of their financial resources in order to sustain their respective causes or endeavors today and in the future.
1Filipino Foundation Chairman Jose AR U. Bengzon III gave this piece of advice to entrepreneurs, financial managers and leaders of nonprofit organizations, faith-based groups with the aim of managing cash flow, assets and risks to achieve sustainability as the country recovers from the Covid-19 pandemic.
According to Bengzon, these groups need to know first what assets and liabilities, as well as expenses, that they have so that they can plan ahead.
“If your expenses exceed your receivable or your income, [then you will have a] deficit. So now you have to look at how are you going to fund that deficit,” he said during the 2nd Financial Planning Forum organized by Spring Rain Global (SRG) last Thursday.
To do so, Bengzon recommended these groups not just spend the money wisely but also put these in the right investment where the money can potentially grow. Among the manifold options, put funds or resources to the money market in the interim, he said.
“That’s 30 days. Maybe you can park your money there for the meantime,” Bengzon said. “And if you have extra savings, then you can look [into] long-term [investments].”
To remain elevated
IN an interview with the BusinessMirror, Bengzon pointed out financial instruments considered “safe” or less risky.
“For example, government securities: five years [of its term] now will probably [be] giving five percent annually,” Bengzon said. He cited the report of the Trust and Investments Group (TIG) of BDO Unibank Inc. that shows the 10-year peso government securities yield was at 7 percent and projected at 6.6 percent this year.
He said that yields are likely to remain elevated in 2023 but easing Philippine inflation could trigger a pullback in the latter part of the year.
Investors ought to also bet on corporate bonds that, Bengzon said, give higher interest rates since they are considered more risky compared to the former.
“They have different rates. Some corporates pay higher because their investment grade rated by the rating agencies is lower than other companies. If your investment grade is lower, then you will need to pay higher interest rate to attract investors,” said Bengzon.
For philanthropic groups, such as religious congregations and educational institutions, he suggests to stick to blue chip companies that have corporate bonds paying higher rates than the government. Bengzon said these bonds “have been around for some time, well managed and can pay on time.”
Bank on the dollar
WITH the constant downfall of the peso, he said it’s timely to invest in foreign currencies, especially in the greenback.
Citing again the BDO TIG, Bengzon said that the exchange rate of the peso against the US dollar was P55.73 as of December 31, 2022, and is seen to reach the P59 mark. He said the local tender will continue to come under pressure as the current account deficit continues to widen and the US dollar remains strong.
“Buy dollars. Do not only sit on US dollar cash but invest also in a fund that is low risk that gives you dividends in dollars,” Bengzon said.
At this point of time, potential investors, especially philanthropic groups or individuals, must put on hold their plan to turn to the stock market.
“This is because you’re right there in the middle of the 7,000 level. The high during this Covid era in the last three years was 7,500 [while] the low in the last year was 5,800. So you’re basically there near the top,” Bengzon said. He added that the 2023 bottom-up target of 7,600 implies 14-times forward-earnings multiple, which is still a discount from its 10-year historical mean.
Cut spending
GRANTED that the interest rate increases are not yet over, he explained that probably inflation is in check and the US Fed will not be aggressively raising rates anymore.
“I think the global economy has not fully experienced the effects of interest rate hikes. So there might be a delay in disinflation spending. People are spending now,” Bengzon said. “But maybe they are wise enough to know that they need to cut their spending to reserve and to save for a rainy day. We’ll never know when the next pandemic will come.”
“Again, sitting on cash, totally it’s not also good. Because what it is earning sitting on cash [account] and savings account is less than a percent. So that’s why they need to probably assess the situation and their expense needs in the future,” he added.
Given that cause-oriented organizations in general have their expenses, advocacies and community service to support, transparency, good governance and accountability must always be in place, Bengzon said.
“That’s exactly why they need that so that their donors will keep coming back,” he said. “They might have donor for one time and might lose that donor if they do not have transparent and accountability boards.”