The government’s decision to relax the single business group (SBG) investment limit will provide significant benefits to major conglomerates, such as the SM Group, and could help facilitate the conduct of the initial public offering (IPO) of fintech giant GCash.
Abacus Securities Corp. said that while not directly related, the easing of the SBG rule should aid Globe Fintech Innovations Inc. (Mynt), the operator of GCash, in its IPO. Without the relaxation, many funds might have had to reduce their exposure to other Ayala companies or scale back on plans to subscribe to the listing.
“The revised rule might also benefit the listed stocks of the SM Group, as many funds are already at the SBG limit for Sy family entities, which include SM, SM Prime Holdings (SMPH), and BDO Unibank. These companies represent nearly 30 percent of the Philippine Stock Exchange index,” Abacus Securities explained.
The change in policy is expected to attract more mutual fund investments into equity securities and shares of listed conglomerates and their subsidiaries. Juan Paolo Colet, managing director at Chinabank Capital Corp., said that business groups such as San Miguel, Ayala, SM, Gokongwei, and Alliance Global stand to benefit from the new SBG rule.
Last week, the Securities and Exchange Commission (SEC) issued SEC Memorandum Circular No. 2, Series of 2025, which updates the rules surrounding the SBG investment limit. The decision follows requests from various fund managers seeking exemptions from the existing SBG restrictions. The updated guidelines, which replace the earlier SEC Memorandum Circular No. 15, Series of 2020, broaden the scope for equity, balanced, and multi-asset funds with actual equity security exposure.
Previously, investment companies were limited to investing no more than 20 percent of their net assets in securities, money market instruments, deposits, and financial derivatives linked to any single SBG. However, the new policy removes this restriction for funds with no investments in financial derivatives, effectively lifting the SBG limit for certain funds.
This development comes as part of the SEC’s ongoing efforts to streamline the regulatory environment, making it easier for investment companies to diversify their portfolios without being unduly restricted by the SBG cap.
But even with these changes, all investment companies, including those affected by the updated rule, remain subject to other relevant investment limits and restrictions under SEC regulation.
