How to invest in Philippines’ top UITF of 2019

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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 it 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. Also generally called a pooled or managed fund, it gathers all funds from investors with similar investment goals and trade securities in a way that increases the value for them. In the Philippines, all funds 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:

  • dividend
  • stock price increase
  • interest

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.

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.

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
  • ownership
  • front-end fee
  • additional investment
  • management fee

Unit of participation

Each time someone invests, the trust or bank issues units of participation. A unit of participation is a 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.

Initial investment

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.

Ownership

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 at the time of account of opening. So let’s say that you put up ₱5,000 and the NAVPU is set at ₱2 per unit. The bank will issue 2,500 units. (5,000 ÷ 2 = 2,500)

Front-end fee

However, there is a charge called front-end fee, also called sales load. It is taken against the amount that you put up. It is usually about 2% of the total investment. So, there’s a need to re-adjust the example given above.

  • Initial investment: ₱5,000
  • Front-end fee: ₱5,000 x 2% = ₱100
  • Amount after fee: ₱5,000 – ₱100 = ₱4,900
  • NAVPU: ₱2 per unit
  • Total units issued = ₱4,900 ÷ ₱2 = 2,450 units

Additional investment

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.

Management fee

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.

Tax

All earnings are subject to withholding tax of 20%, which is unlike mutual fund that is non-taxable.

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.

FactorsMutual FundUnit-investment Trust Fund
Who offersInvestment companiesBanks
Who sellsSEC-licensed advisorsBank employees
What you buyShares of mutual fundUnits of participation
PricingNet Asset Value Per Share (NAVPS)Net Asset Value Per Unit (NAVPU)
Who regulatesSecurities and Exchange CommissionBangko Sentral ng Pilipinas
Which law governs managed fundsRepublic Act 2629 – Investment Company Act of the PhilippinesRepublic Act 8791 – General Banking Law
TaxNon-taxableWithholding tax

Types of UITF

Here’s a summary of the risk and investor profile for each type of fund.

FundAssetRiskInvestor
Stock fundsStocksHighAggressive
Balanced funds Stocks and bonds Medium Between aggressive and conservative
Bond fundsBondsLowConservative
Money market fundsFixed incomeLowVery conservative

Stock fund

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

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

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

Advantages

There are many advantages when investing in UITFs.

  • 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.

Cons

  • Your earnings may be taxable.
  • 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

NameTrustTypeROI
Manulife Asia Pacific REIT Fund Of Funds (PHP Unhedged Class A)ManulifeEquities18.15%
UnionBank Tax Exempt PortfolioUnionBankBond15.18%
AB Capital Equity FundAB CapitalEquities14.04%
UnionBank Long Term Fixed Income PortfolioUnionBankBond13.48%
BPI Fixed Income Portfolio Fund-Of-FundsBPIBond12.77%
SB Peso Bond FundSecurity BankBond12.73%
ABF Philippines Bond Index FundBPIBond12.70%
BPI Philippine Infrastructure Equity Index FundBPIEquities12.14%
Odyssey Peso Bond FundBPIBond11.98%
UnionBank Peso Balanced PortfolioUnionBankBalanced11.86%

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)

FundTrustROI
Manulife Asia Pacific REIT Fund Of Funds (PHP Unhedged Class A)Manulife14.04%
AB Capital Equity FundAB Capital12.14%
BPI Philippine Infrastructure Equity Index FundBPI11.61%
PNB High Dividend FundPNB11.29%
UCPB Equity FundUCPB11.26%
SB High Dividend Peso Equity FundSecurity Bank11.08%
UCPB High Dividend FundUCPB10.83%
SB Peso Equity FundSecurity Bank10.79%
Rizal Equity FundRCBC10.74%
BDO Esg Equity FundBDO10.74%
Manulife Equity Wealth Fund (Class I)Manulife10.72%
BPI Philippine Equity Index FundBPI10.40%
UnionBank Philippine Equity Index Tracker Fund PortfolioUnionBank10.38%
BDO Institutional Equity FundBDO10.34%
Metro Philippine Equity Index Tracker FundMetrobank10.28%
Atram Philippine Equity Smart Index FundAtram10.18%
Metro Aspire Equity Feeder FundMetrobank10.14%
PNB Phil-Index Tracker FundPNB10.07%
UnionBank Large Capitalization Philippine Equity PortfolioUnionBank9.97%
UCPB Philippine Index Equity FundUCPB9.88%

Best UITF Balanced Funds

FundTrustROI
Unionbank Peso Balanced PortfolioUnion Bank11.86%
Odyssey Diversified Capital FundBPI11.45%
Odyssey Diversified Balanced FundBPI11.43%
AB Capital Balanced FundAB Capital10.47%
SB Peso Asset Variety FundSecurity Bank9.55%
China Bank Balanced FundChinabank8.63%
UCPB Balanced FundUCPB8.51%
Rizal Balanced FundRCBC7.94%
BDO Peso Balanced FundBDO7.10%
Landbank Growth FundLand Bank6.48%
Metro Balanced FundMetrobank6.46%
Metro Aspire Balanced Feeder FundMetrobank6.24%
Best Balanced FundPBCom5.87%
BPI Balanced FundBPI5.59%
Sterling Balanced FundSterling Bank of Asia5.33%
RBank Balanced FundRobinsons Bank4.66%
PNB Balanced FundPNB4.26%
RBank Tax-Exempt Retirement FundRobinsons Bank3.83%
Metro Unit Paying FundMetrobank2.77%

Best UITF Bond Funds (top 20)

FundTrustROI
Unionbank Tax Exempt PortfolioUnionbank15.18%
Unionbank Long Term Fixed Income PortfolioUnionbank13.48%
BPI Fixed Income Portfolio Fund-Of-FundsBPI12.77%
SB Peso Bond FundSecurity Bank12.73%
ABF Philippines Bond Index FundBPI12.70%
Odyssey Peso Bond FundBPI11.98%
Unionbank High Net Worth Medium-Term Peso Fixed Income FundUnionbank11.26%
Unionbank Philippine Peso Fixed Income PortfolioUnionbank8.88%
Manulife Income Builder Fund (Class I)Manulife8.68%
Atram Total Return Peso Bond FundAtram8.25%
Peso Investment Trust FundAUB7.67%
Unionbank High Net Worth Intermediate-Term Peso Fixed Income FundUnionbank7.44%
Manulife Income Builder Fund (Class A)Manulife7.07%
BDO Merit Fund Medium Term PortfolioBDO6.91%
Metro Max-5 Bond FundMetrobank6.23%
Unionbank Infinity Prime FundUnionbank6.19%
UCPB Peso Bond FundUCPB6.17%
Odyssey Peso Medium Term Bond FundBPI5.95%
Unionbank Medium Term Fixed Income PortfolioUnionbank5.95%
Metro Aspire Bond Feeder FundMetrobank5.94%

Best UITF money market funds (top 20)

FundTrustROI
Peso Money Market FundAUB4.59%
Rizal Peso Money MarketRCBC4.49%
Unionbank Peso Short Term Fixed Income PortfolioUnionbank4.42%
China Bank Cash FundChinabank4.41%
PNB Institutional Money Market FundPNB4.26%
China Bank Short-Term FundChinabank4.25%
RBank Peso Money Market FundRobinson Bank4.18%
Metro Short Term FundMetrobank4.16%
China Bank Money Market FundChinabank4.10%
BPI Money Market FundBPI4.09%
RCBC Savings Bank Peso Money Market UITFRCBC4.06%
BDO Short Term FundBDO4.02%
Unlad Kawani Money Market FundDBP3.98%
BDO PERA Short Term FundBDO3.93%
Rizal Peso Cash Management FundRCBC3.90%
BPI Short Term FundBPI3.88%
Class I – Unlad Panimula MM FundDBP3.80%
PSBank Money Market FundPSBank3.77%
SB Peso Money Market FundSecurity Bank3.72%
Class II – Unlad Panimula MM FundDBP3.71%

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.

How is unit of participation different from shares?

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 day. So when you open an account, the the number of units to be issued to you would be the NAVPU of the previous day, not of the current day.

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

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