MANILA, Philippines — The Securities and Exchange Commission (SEC) has rolled out new rules governing “umbrella funds,” allowing multiple subfunds to operate under a single investment company.
Under SEC Memorandum Circular No. 14, Series of 2026, the regulator defined an umbrella fund as an open-end investment company composed of two or more subfunds with segregated assets and liabilities.
The rules seek to give investment companies flexibility to offer a range of asset classes—such as equity, bond or balanced funds—within one structure, while ensuring that risks and obligations remain confined to each subfund.
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SEC Chair Francis Lim said the new rules could help deepen the country’s shallow capital market by making it easier for mutual fund players to set up and offer more products.
Lim noted that under the traditional structure, each mutual fund typically requires a separate company.
“In umbrella funds, it’s just one and then there are subfunds, so it’s fast,” he added.
Segregation of assets
A key feature of the framework is the strict segregation of assets and liabilities among subfunds. The assets of each subfund cannot be used to settle obligations of another, except as otherwise allowed by law.
This means investors’ exposure is limited only to the specific subfund where they invested—an important safeguard highlighted by the SEC.
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The circular also requires umbrella funds to maintain at least two subfunds, with timelines for registering additional ones to ensure the viability of the structure.
The SEC imposed detailed disclosure requirements, including a main prospectus and subfund supplements outlining investment objectives, risks, fees and policies.
Fund managers must also disclose valuation methods, net asset value computation, redemption procedures and switching rules between subfunds.
Registration required
Before offering securities, umbrella funds must secure a secondary license from the SEC and register each sub-fund separately.
The rules also outline processes for launching new sub-funds, reallocating units and terminating sub-funds, including board approvals and investor notification requirements.
Switching between sub-funds is allowed, subject to conditions disclosed in the prospectus.
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The circular mandates regular reporting, including annual and quarterly financial statements, with clear segregation of assets and liabilities.
Fund managers are also required to comply with existing corporate governance, anti-money laundering and financial reporting standards.
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Audited financial statements must be prepared for each sub-fund and the umbrella fund as a whole. The SEC emphasized that the framework aligns with its mandate to protect investors and ensure fair and transparent markets. INQ