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Do you know that you can actually invest in banks? No, not just time deposits or high-interest savings accounts. Invest, as in buying stocks of big Philippine corporations. You can open a UITF or unit investment trust fund.
In this article, I am going talk about what UITF is, why it’s good as a source of passive income, and the best UITFs in the Philippines in 2019.
What is a UITF?
It is a pool of money from the public that is invested with the goal of optimizing returns. It is a pooled or managed fund where it gathers funds from investors with similar investment goals and trade securities in a way that increases the value for them. In the Philippines, all UITFs are managed by trust entities through banks, and regulated by the Bangko Sentral ng Pilipinas (BSP).
A UITF is also considered open-ended. It means anyone can invest and get back their money any time.
How does a UITF earn?
It can invest in stocks and bonds, which are traded by a fund manager on behalf of investors. Stocks are proof of ownership in a business, and they can be acquired through the Philippine Stock Exchange. Bonds on the other hand are debts of our government or companies.
The fund earns through the following:
- stock price increase
Dividends. Trust funds earn through stocks in dividends and price increase. A dividend is a portion of company’s earnings that they give back to their shareholders. Every year, companies like SM and Jollibee report their earnings to the government, and they can either keep all of it to put back to the business or release some of them to shareholders.
Stock price increase. Also, price increase on company shares in the stock market can occur when many investors are attracted to its future business prospects. However, the opposite is true when it has disappointing actual earnings or forecast, and then its price may decrease.
Interest. A bond on the other hand is a proof of indebtedness. The Philippine government and companies issue bonds when they want to borrow money. In return, they pay interest and settle the debt in full upon maturity.
Features of a UITF
Below are some of the general features when investing in the trust fund.
- units of participation
- net asset value per unit or NAVPU
- initial investment
- additional investment
- management fee
Unit of participation
Each time someone invests, the trust company issues units of participation. A unit of participation is proof that the person is invested in the trust fund, and that they are entitled to all of its gains as well as losses. Later on, you will learn how many units will be given to you when you start.
Net asset value per unit or NAVPU
This may sound intimidating, but the net asset value per unit or NAVPU is simply the worth of the UITFs. Think of it as the value of the entire trust fund if the bank shuts it down by selling it. The NAVPU is determined by adding all of its assets less all debts, and the result is divided by the number of units.
Trusts and banks inform the public of the NAVPU regularly. Most of them do this on an almost daily basis except weekends and holidays. You may check on them via their website.
The initial investment is the least amount of money with which you can open a trust fund. Some would allow you to start investing for as low as ₱5,000.
You have the choice to add more if you want. Most UITF set a minimum on how much you can reinvest, some as low as ₱1,000. This amount is subject to fees and charges. There is no deadline or rule that you must invest regularly, but it is recommended.
The management fee is charged to pay for the operation of the fund. It is usually a percentage of the investment. You don’t have to pay this separately like the sales load. It is already taken into account in the computation of the NAVPU.
All earnings are subject to withholding tax of 20%, which is unlike mutual fund that is non-taxable in 2004. Although, here’s a news clipping that claimed otherwise and this position from the Trust Officers Association of the Philippines that proceeds are net of tax.
How to calculate your unit of participation
How do you know how many units will be given to you when you invest? Your money will be converted into units of participation. It is done by looking at the NAVPU as well as the timing of the investment.
For example, when you invested before the cut off time (which varies from company to company), then the NAVPU to be used would be the one declared at the end of the day. When invested is done after the cut-off, then the NAVPU of the next day is going to be used.
There are trust companies though that would use the NAVPU of the day that you put up your money, regardless if it was done before or after the cut-off time.
So let’s say that you put up ₱50,000 and the NAVPU is set at ₱10.00 per unit. The bank will issue 5,000 units. (50,000 ÷ 10 = 5,000 units)
How to calculate your return on investment
It’s easy to check your ROI or return on investment. You just need to determine the following:
- Starting capital
- Starting NAVPU
- Total issued units of participation
- NAVPU during redemption
1. Determine your total number of units
This is easy. Simply, divide your starting capital with the NAVPU that the company declared. So if you have 50K pesos starting capital and the NAVPU is 10 pesos, your total number of units is 5,000. (50,000 ÷ 10 = 5,000)
2. Determine your total investment value
When you redeem, check the NAVPU that the company declares for your redemption. To get the total investment value, just multiply the NAVPU and your number of units. Say that the NAVPU is now at P15. So with 5,000 units, your total investment value is P75,000. (5,000 * 15 = 75,000)
3. Determine gain or loss
Your gain or loss is the difference between your starting capital and total investment value. Since your starting capital was P50,000 and your total investment is now P75,000, your gain is P25,000. (75,000 – 50,000 = 25,000).
4. Now, compute for ROI
Your return on investment (ROI) is simply your gain/loss divided by your starting capital. Since your gain is P25,000 and your starting capital is P50,000
Here’s the summary of the steps.
Where can you see the returns of all Philippine UITFs?
You can visit UITF PH. It’s a website that holds information on UITFs that are offered in the market and maintained by the Trust Officers Association of the Philippines (TOAP).
What’s nice about it is that it also gives real-time update on the top funds according to categories. Here’s how you can view the NAVPS.
1. Go to https://uitf.com.ph.
2. Click “Top 5 Best Performing Funds” on the right side-bar.
3. Choose the fund classification: equities, balanced, bond or money market. Also, select the currency and date range. Year to date means from the beginning of the current year, year on year means from 365 days ago, and custom is where you can put any date in the past.
Here is a sample search year-to-date result for Equity Funds that are peso-denominated. This is not an endorsement to the funds that you see here, and also take note that the returns would vary and do not guarantee future performance.
Differences between UITF and mutual fund
Before we talk about their differences, it’s good to start with similarities.
A UITF and a mutual fund are both pooled funds. They use the money put up by the public who choose to invest in them. Then they purchase and sell (trade) assets in the form of stocks and bonds, which are collectively called securities, in order to grow the value of the funds.
They’re different in the way they are managed and regulated. Here is a complete guide on managed funds.
|Factors||Mutual Fund||Unit-investment Trust Fund|
|Who offers||Investment companies||Banks|
|Who sells||SEC-licensed advisors||Bank employees|
|What you buy||Shares of mutual fund||Units of participation|
|Pricing||Net Asset Value Per Share (NAVPS)||Net Asset Value Per Unit (NAVPU)|
|Who regulates||Securities and Exchange Commission||Bangko Sentral ng Pilipinas|
|Which law governs managed funds||Republic Act 2629 – Investment Company Act of the Philippines||Republic Act 8791 – General Banking Law|
Types of UITF
Here’s a summary of the risk and investor profile for each type of fund.
|Balanced funds||Stocks and bonds||Medium||Between aggressive and conservative|
|Money market funds||Fixed income||Low||Very conservative|
The equities fund is primarily invested in the stocks of companies that are on the Philippine Stock exchange. It buys or sells stocks of Jollibee, Aboitiz, Globe, and other publicly-listed corporations. It can be categorized as index fund or equities fund.
Index fund. An index fund is a type of fund that copies the composition of the stock index and its goal is to simply match the latter’s returns. The stock index is the name of the group that is composed of the country’s largest 30 companies, which are also referred to as blue chip companies. Example of this Maynilad, First Gen, BDO, and Metrobank.
Equities fund. Equities fund is a type of fund that is just made up of stocks. Unlike the index fund, its objective can be varied and it can invest in companies that do not belong to the index. One possible goal is to trade stocks in a way that might exceed the returns of the index.
Bond fund trades bonds which are simply debts. These debts are owed by the government or companies that borrow money. In return, the fund collects interest and redeems the full amount once the debt matures. It is considered relatively safe than stocks.
Balanced fund is a mix of bonds and stocks. These are for moderately aggressive investors who may want to avoid the risks of stocks but also want to get higher return than what can be potentially offered by bonds.
Money market fund
Money market fund is involved in trading securities in the money market, the exchange for banks who want to borrow money from other banks. It is also where government’s short-term debts are bought or sold. It is considered safe and liquid
Benefits of UITF
There are many advantages when investing in UITFs.
- There is no front-end fee or sales load unlike mutual funds.
- One of the benefits is that it’s offered by trust entities and banks, which makes it really easy to open and manage. Here’s a complete list of trust companies offering UITF.
- You only need a small capital to invest. Some can be started for as low as ₱1,000.
- The fund is already diversified in the way it acquires securities from various companies and across industries, which lessen risk.
- When you want to get your money back, the fund is bound to honor it by converting units to cash using NAVPU.
- By investing, you get to earn passive income.
- Setting aside savings in an investment allows you to take advantage of expert fund manager who can maximize your investment.
- It’s convenient to track as banks move toward digitized access. Your online account, such as the one with BPI, makes it possible for you to manage your deposits and investments.
- Capital gains may be subject to 20% tax although according to UITF PH website, investors would not be charged any taxes when redeeming their investment if it’s already been paid for by the trust company.
- Returns are not guaranteed or insured by Philippine Deposit Insurance Corporation.
- There might be capital loss especially in equities.
- Depending on the general market condition, your expectation of gains may not be realized.
- The fund manager decides which companies or bonds to buy, so you have limited control on the actual assets it holds.
- Units of participation are not stocks (like in mutual funds) so they do not give shareholder rights.
Top UITF Philippines 2019
|Manulife Asia Pacific REIT Fund Of Funds (PHP Unhedged Class A)||Manulife||Equities||18.15%|
|UnionBank Tax Exempt Portfolio||UnionBank||Bond||15.18%|
|AB Capital Equity Fund||AB Capital||Equities||14.04%|
|UnionBank Long Term Fixed Income Portfolio||UnionBank||Bond||13.48%|
|BPI Fixed Income Portfolio Fund-Of-Funds||BPI||Bond||12.77%|
|SB Peso Bond Fund||Security Bank||Bond||12.73%|
|ABF Philippines Bond Index Fund||BPI||Bond||12.70%|
|BPI Philippine Infrastructure Equity Index Fund||BPI||Equities||12.14%|
|Odyssey Peso Bond Fund||BPI||Bond||11.98%|
|UnionBank Peso Balanced Portfolio||UnionBank||Balanced||11.86%|
The above table shows year-on-year return on investment (ROI) of top UITFs in the country (PESO) as of June 2019.
Best UITF equities funds (top 20)
|Manulife Asia Pacific REIT Fund Of Funds (PHP Unhedged Class A)||Manulife||14.04%|
|AB Capital Equity Fund||AB Capital||12.14%|
|BPI Philippine Infrastructure Equity Index Fund||BPI||11.61%|
|PNB High Dividend Fund||PNB||11.29%|
|UCPB Equity Fund||UCPB||11.26%|
|SB High Dividend Peso Equity Fund||Security Bank||11.08%|
|UCPB High Dividend Fund||UCPB||10.83%|
|SB Peso Equity Fund||Security Bank||10.79%|
|Rizal Equity Fund||RCBC||10.74%|
|BDO Esg Equity Fund||BDO||10.74%|
|Manulife Equity Wealth Fund (Class I)||Manulife||10.72%|
|BPI Philippine Equity Index Fund||BPI||10.40%|
|UnionBank Philippine Equity Index Tracker Fund Portfolio||UnionBank||10.38%|
|BDO Institutional Equity Fund||BDO||10.34%|
|Metro Philippine Equity Index Tracker Fund||Metrobank||10.28%|
|Atram Philippine Equity Smart Index Fund||Atram||10.18%|
|Metro Aspire Equity Feeder Fund||Metrobank||10.14%|
|PNB Phil-Index Tracker Fund||PNB||10.07%|
|UnionBank Large Capitalization Philippine Equity Portfolio||UnionBank||9.97%|
|UCPB Philippine Index Equity Fund||UCPB||9.88%|
Best UITF Balanced Funds
|Unionbank Peso Balanced Portfolio||Union Bank||11.86%|
|Odyssey Diversified Capital Fund||BPI||11.45%|
|Odyssey Diversified Balanced Fund||BPI||11.43%|
|AB Capital Balanced Fund||AB Capital||10.47%|
|SB Peso Asset Variety Fund||Security Bank||9.55%|
|China Bank Balanced Fund||Chinabank||8.63%|
|UCPB Balanced Fund||UCPB||8.51%|
|Rizal Balanced Fund||RCBC||7.94%|
|BDO Peso Balanced Fund||BDO||7.10%|
|Landbank Growth Fund||Land Bank||6.48%|
|Metro Balanced Fund||Metrobank||6.46%|
|Metro Aspire Balanced Feeder Fund||Metrobank||6.24%|
|Best Balanced Fund||PBCom||5.87%|
|BPI Balanced Fund||BPI||5.59%|
|Sterling Balanced Fund||Sterling Bank of Asia||5.33%|
|RBank Balanced Fund||Robinsons Bank||4.66%|
|PNB Balanced Fund||PNB||4.26%|
|RBank Tax-Exempt Retirement Fund||Robinsons Bank||3.83%|
|Metro Unit Paying Fund||Metrobank||2.77%|
Best UITF Bond Funds (top 20)
|Unionbank Tax Exempt Portfolio||Unionbank||15.18%|
|Unionbank Long Term Fixed Income Portfolio||Unionbank||13.48%|
|BPI Fixed Income Portfolio Fund-Of-Funds||BPI||12.77%|
|SB Peso Bond Fund||Security Bank||12.73%|
|ABF Philippines Bond Index Fund||BPI||12.70%|
|Odyssey Peso Bond Fund||BPI||11.98%|
|Unionbank High Net Worth Medium-Term Peso Fixed Income Fund||Unionbank||11.26%|
|Unionbank Philippine Peso Fixed Income Portfolio||Unionbank||8.88%|
|Manulife Income Builder Fund (Class I)||Manulife||8.68%|
|Atram Total Return Peso Bond Fund||Atram||8.25%|
|Peso Investment Trust Fund||AUB||7.67%|
|Unionbank High Net Worth Intermediate-Term Peso Fixed Income Fund||Unionbank||7.44%|
|Manulife Income Builder Fund (Class A)||Manulife||7.07%|
|BDO Merit Fund Medium Term Portfolio||BDO||6.91%|
|Metro Max-5 Bond Fund||Metrobank||6.23%|
|Unionbank Infinity Prime Fund||Unionbank||6.19%|
|UCPB Peso Bond Fund||UCPB||6.17%|
|Odyssey Peso Medium Term Bond Fund||BPI||5.95%|
|Unionbank Medium Term Fixed Income Portfolio||Unionbank||5.95%|
|Metro Aspire Bond Feeder Fund||Metrobank||5.94%|
Best UITF money market funds (top 20)
|Peso Money Market Fund||AUB||4.59%|
|Rizal Peso Money Market||RCBC||4.49%|
|Unionbank Peso Short Term Fixed Income Portfolio||Unionbank||4.42%|
|China Bank Cash Fund||Chinabank||4.41%|
|PNB Institutional Money Market Fund||PNB||4.26%|
|China Bank Short-Term Fund||Chinabank||4.25%|
|RBank Peso Money Market Fund||Robinson Bank||4.18%|
|Metro Short Term Fund||Metrobank||4.16%|
|China Bank Money Market Fund||Chinabank||4.10%|
|BPI Money Market Fund||BPI||4.09%|
|RCBC Savings Bank Peso Money Market UITF||RCBC||4.06%|
|BDO Short Term Fund||BDO||4.02%|
|Unlad Kawani Money Market Fund||DBP||3.98%|
|BDO PERA Short Term Fund||BDO||3.93%|
|Rizal Peso Cash Management Fund||RCBC||3.90%|
|BPI Short Term Fund||BPI||3.88%|
|Class I – Unlad Panimula MM Fund||DBP||3.80%|
|PSBank Money Market Fund||PSBank||3.77%|
|SB Peso Money Market Fund||Security Bank||3.72%|
|Class II – Unlad Panimula MM Fund||DBP||3.71%|
Qualities of the right UITF for you
There is no one fund that’s suits everyone. That’s because the most appropriate one for you depends on your situation. Here are tips in getting the best UITF.
- Look for a reputable trust entity.
- Research on the level of support they give to their clients. A good customer care goes a long way.
- Check the rates above. Recent performance can be a factor when you are making a decision to invest.
- Remember that past returns do not guarantee future performance. So it’s still pays to research and make comparisons on funds, companies, etc.
- Inquire too on how they update clients on their accounts. Is there an online access? Will an sms, email or mail be sent periodically?
- What is your goal with your investment? Are you saving up for something? Having a purpose helps in determining where to invest. It also prevents you from prematurely closing it.
- How is your financial health? Do you have money for emergency situations?
- How likely are you to need the money that you’ve put into the fund?
- Understand your approach to risk. Are you someone who’s willing to go for more or less risk?
How to invest in UITF
Getting started with UITF is actually easy. It’s like opening an ordinary bank account.
- Choose the trust entity. More than anything else, go for a reputable company with established history, reasonable fees, and good customer service.
- Location is crucial. You may research online on banks or trust entities that offer them and see if they have a branch near you.
- Talk to company reps. Drop by a visit, ask questions, and get to know about the products as much as you can.
- Prepare the required files. Usually, you will be requested to submit a valid identification card, proof of billing, and the minimum initial investment.
- Open the account. You will be asked to fill out forms that would establish your source of income, your risk profile, and other data. Usually, it takes a couple of days for the process, such as issuing units, to be completed.
- Get details on the company’s contact details just in case you might want to get in touch with them in the future.
Optimize your UITF
Once your investment starts rolling, then it’s time to make the most out of your trust fund.
- Start immediately. Don’t spend too much time sitting on the fence. It’s better to have something set aside for savings than none at all.
- Start small. Never think that just because you can only put up the required minimum amount, it’s not worth it.
- Are you investing for your child’s future? An “in-trust-for” or ITF would be a good arrangement. It transfers the account to your kids once they reach the age of 18 years old.
- Reinvest consistently or whenever you can. Adding more each month is a good idea too. In fact, some banks allow auto-debit, so you can enroll a payroll account which gets deducted monthly and automatically goes to your investment.
- Track the the fund periodically. This is where updates from the trust comes in as they can help you keep tabs on what’s going on.
- Continue learning. There might be a new fund with a goal that suits you.
Frequently asked questions about UITF
Below are some of the common questions on the details about investing in trust funds.
Can I invest in more than one fund?
Yes, you can. Different funds can be used for different goals in your life. To make it more convenient for you, it would be better to go with a Philippine trust company that offers several funds. In this way, you can open multiple accounts and manage them relatively more easily.
Does my UITF mature?
No. Trust funds do not mature. They are open-ended. It is really up to you when to start and when to end your investments. There is no schedule when you can purchase or redeem units of participation.
How do I know the where the fund is invested?
You should be given information by the trust company on the goal of the fund as well as the securities it holds. Usually, these securities are bought or sold, so they may change from time to time. Different trust companies have different ways to disseminate information on their portfolio, but do try to check their website.
UITF’s units of participation simply means that you are part of the fund. It represents your proportionate interest in its total value and you do not have claim to its assets. Shares, in the case of mutual fund, mean that you are part-owner of the company and entitled to the rights of a shareholder such as voting, attending annual shareholder’s meeting, etc.
At what price can the units be purchased?
The price of the units depend on the NAVPU, the net asset value per unit. It is determined by getting the worth of the total fund divided by the units that were issued to all participants.
When is UITF NAVPU calculated?
NAVPU or net asset value per unit of the UITF is calculated at the end of the trading day, which is daily except holidays and weekends.
So when you open an account, the the number of units to be issued to you would be the NAVPU that the company declares either on the day you invested or the next trading. Check with the company as they have different rules on which NAVPU to use.
Are all UITF the same?
No, they’re not. They differ based on various factors. Each fund has its own goal, portfolio mix, fees, settlement period, and terms on transactions such as opening an investment, re-investing, or redeeming units.
How do I redeem units?
Go to your trust company or bank. Request that you want to get your money back. There’s usually a bit of a turnaround time, so be ready to wait for a while. Your money may be deposited straight to your account, in cash, or in check.
How much do I get when the investment is redeemed?
Simply multiply the number of units and the NAVPU of the fund which is computed and published at the end of the day. So, say that you have 2,000 units and NAVPU of ₱10. The total is going to be ₱20,000.
How do I compute my UITF earnings?
Multiply the number of units and the difference between NAVPU when you started the investment and NAVPU on redemption. So, that’s (Redeemed NAVPU – Opened NAVPU) x Number of units.
What is an ITF?
An ITF stands for “in trust for.” It’s an arrangement where parents transfer the fund to their kids when they reach the age of maturity.
Are UITF guaranteed?
No, they’re not. They are not deposit accounts. Earnings are not guaranteed. Past data does not guarantee future returs.
Are UITF insured?
No. They’re not deposit accounts. Your investment is not insured with the Philippine Insurance
- Unit Investment Trust Fund. Accessed July 6, 2019