SEC issues rules on Umbrella Funds

The Securities and Exchange Commission (SEC) has issued rules on the creation of Umbrella Funds, expanding the structuring options for investment companies in a bid to provide greater operational flexibility and administrative efficiency for fund managers and increase portfolio diversification options for investors.

The Commission on April 8 issued SEC Memorandum Circular No. 14, series of 2026, which provided for the Rules on Umbrella Funds, outlining the policy on the registration, operation, and reporting of open-end investment companies structured as Umbrella Funds and its Sub-funds.

“These new rules provide the public with clear guidance on the registration and reportorial requirements of these funds, as part of our commitment to enhance operational adaptability and streamline administrative processes of funds and fund managers, while expanding the range of investment opportunities in the capital market,” SEC Chairperson Francis Lim said.

“By allowing single investment firms to pursue other investment objectives and strategies through the creation of sub-funds, registration and monitoring of the umbrella fund and accompanying sub-funds will be more efficient while also providing investors with the opportunity to conveniently diversify their portfolio,” Chairperson Lim added.

Under the rules, an Umbrella Fund refers to a newly formed or existing registered open-end unit-issuing investment company that holds two or more Sub-Funds, such as equity, bonds or fixed incomes, among others, with segregated assets and liabilities.

Registration of Umbrella Funds

Eligible investment firms that seek to adopt the Umbrella Fund structure shall include the words “Unitized Umbrella Fund” in its name and shall have a subscribed and paid-up capital of at least P100 million.

An Umbrella Fund shall secure a secondary license to act as an investment company with the SEC and must have a registration statement duly filed with and approved by the Commission before offering securities for sale, as required under Republic Act (RA) No. 8799, or the Securities Regulation Code (SRC).

An existing investment company offering only units of participation may be converted into an Umbrella Fund by amending its articles of incorporation, by laws, and registration statement, as approved by shareholders holding at least a majority of its outstanding capital stock.

Sub-Funds

While Sub-Funds have no legal personality separate and distinct from the Umbrella Fund, fund managers shall treat each Sub-Fund as separate investment companies.

As such, the assets of a Sub-Fund shall belong exclusively to the Sub-Fund and shall not be used to discharge, directly or indirectly, the liabilities of, or claims against, the Umbrella Fund, or any other Sub-Fund.

Such segregation of assets and liabilities for each Sub-Fund is in line with the goal of promoting investor protection, as unitholder loss will be strictly limited to their investment in a specific Sub-Fund.

Unitholders shall be allowed to switch or transfer from one Sub-Fund to another of the Umbrella Fund, subject to reasonable limitations, fees, and procedures as disclosed in the Main Prospectus of the Umbrella Fund.

Reportorial Requirements

Fund managers, on behalf of an Umbrella Fund or the Sub-Fund, shall submit reports required of investment companies, as provided under the SRC, RA No. 11232, or the Revised Corporation Code of the Philippines, RA No. 2629, or the Investment Company Act, and the SEC MC No. 6, series of 2009, which provided for the Revised Code on Corporate Governance, as well as other applicable laws.

In addition, fund managers must submit monthly sales and redemption reports disclosing the average net asset value calculation per Sub-Fund.

Aside from filing their own financial statements that are compliant with Philippine Financial Reporting Standards, Umbrella Funds are also required to file separate quarterly and annual financial statements for each Sub-Fund.
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A consolidated financial statement is allowed, provided that each Sub-Fund’s assets, liabilities, income and expenses are adequately presented and disclosed. The annual financial statements should also be audited by an independent auditor accredited by the SEC.