Trip report: Putting the Philippines on the map

Around 115 million people currently live in the Philippines, placing it just below Japan and Mexico in the global population league table but ahead of Germany, Turkey and France2. The archipelago contains more than 7,000 islands and has a roughly similar landmass to Italy. Despite this, many investors might, like President McKinley, struggle to find it on a map: companies in the Philippines exhibit low levels of foreign ownership – on average, just 10% of the shares of listed companies are owned by overseas investors3. The valuations of its listed companies are correspondingly modest by global standards4.

Earlier this year, we visited the islands for the first time since the covid pandemic. The local brokers we met during our trip welcomed us enthusiastically, noting that they hadn’t received many overseas investors in recent years. We were encouraged by what we saw and heard during our visit – particularly during our conversations with a handful of long-term stewards.

A large, young and under-served market

The average Filipino is 25 years old – around 19 years younger than the average European5. The productivity advantage this confers should help it to begin to close the income gap to older, richer economies. In 2024, GDP-per-capita in the Philippines was roughly 90% lower than in the EU6. Low penetration rates for basic services mean that some potentially vast markets are as yet untapped. Some 33% of Filipinos, for instance, don’t have a bank account7. This should not be surprising given that the minimum daily wage in some regions can be as little as USD6 per day (the World Bank estimates almost 17% of Filipinos live on less than USD4.20 per day8) and that it is not uncommon for the Philippines’ ubiquitous ‘sari-sari’ stores – its small, family-owned convenience shops – to break up multipacks into individual units and to extend credit to their customers to enable them to buy basic hygiene products.

The importance of stewards amid corruption and political change

During the covid pandemic, the private sector provided essential help to communities and businesses when they needed it most. One of the companies we met during our visit estimated that 10% of the country’s covid vaccinations were carried out on its premises. The same company suspended rent collections from its business tenants for two years. The goodwill these types of actions helped to create should endure for years.

In some Asian countries, the dominance of family-owned businesses can create resentment. In our experience, this is less common in the Philippines. Indeed, the country’s multi-generational conglomerates can be seen as having provided a reassuring constant and a steadying influence amid years of political strain.

Politics and corruption are issues in the Philippines. One of our local contacts stated that their wish for the Philippines would be to “eliminate corruption”. We do, of course, consider political conditions, which can break an investment case. One of the reasons why we have had relatively few investments in the Philippines until recently was our concern with the country’s approach to policymaking. And while no political system is above criticism, we believe the political situation in the Philippines has become more conducive to investment. This alone, however, does not make the investment case; we need to find high-quality companies with careful stewards.

SM Investments: quiet, politically neutral stewards

In countries like the Philippines, we want to identify companies run by stewards who have consciously refrained from taking sides politically. SM Investments, stewarded by the Sy family, is a good example. In their daily lives, most Filipinos will have a touch point with one its goods or services. Millions of Filipinos rely on the products and services that it provides in retail (SM Retail), banking (BDO Unibank) and property development (SM Prime). The family, however, are careful not to voice their opinions on politics or politicians. They are deliberately low-key, preferring anonymity to flamboyance. Yet while the Sy family are quiet, they dream big.

SM Prime is currently constructing a 360-hectare property project – Pasay 360 – on a site just south of Manila where there is, at present, no land to build on. For the Sy family, Manila’s urban future relies on reclaiming land from the sea. Perhaps inevitably, the plans initially encountered opposition and achieving the necessary permissions demanded patience. Rather than cutting corners, however, the company’s professional leaders listened to criticism from stakeholders and responded to it fairly and legally. This suggests to us that the Sy family considers that its standing in the wider community matters. We agree: to abuse trust is to lose it.

The Sy family’s approach embodies another characteristic we are looking for in good stewards. We welcome family-owned businesses that reject nepotism and instead employ professional managers to run their day-to-day operations. In the case of SM Investments, the vision, ambition and confidence all belong to the family but the details are looked after by professionals.

By the time Pasay 360 is complete, it will be bigger than Central Park in New York and roughly 10 times the size of Canary Wharf in London. It will have transformed the traffic flow, amenities and quality of life in one of the world’s most densely populated cities, simultaneously contributing to human development and driving financial returns. The Sy family, however, are not the only stewards taking a patient approach to developing the Philippines.

Ayala: democratising credit

Ayala is the holding company for the Zóbel de Ayala family. Its interests span a range of industries, including banking (Bank of the Philippine Islands – BPI), telecoms (Globe) and property (AyalaLand). One part of its portfolio is Globe Fintech Innovations (‘Mynt’), the owner of GCash, a mobile-payment system that has been used by eight out of 10 Filipinos9. Since its launch in 2004, GCash has become so popular that is it has become a verb: “I will GCash you”. It allows Filipinos, including those without a bank account, to transfer cash quickly, securely and cheaply to friends, families, and businesses. We have long believed that increased financial inclusion can be a catalyst for economic growth, poverty reduction, and social empowerment. GCash is convenient and its repeated use by customers helps the company build a detailed picture of its users, allowing it to assemble a picture of an individual’s creditworthiness. GCash is now taking the logical next step by expanding its services to include loan disbursement. It is, in effect, helping to democratise credit.

We are often asked: “Why invest in Asia?” In many ways, the answer can be found in the seemingly lost islands of the Philippines. This is a country in which high-quality companies – controlled by entrepreneurial founding families but run by professional managers – have overcome political disruption and have the long-term vision to transform the lives of millions. We continue to look for companies with the confidence, patience and ambition to invest their capital today to tap into the huge profit pools of tomorrow and to help put the Philippines back on the investment map.

Chris McGoldrick
August 2025