Monday, October 29, 2012

How To Invest In UITF?

What is a Unit Investment Trust Fund?

Unit Investment Trust Fund is an open-ended trust fund which consists of collective investments of numerous investors which are pooled together with the intention of achieving a certain investment objective. It is offered by banks and managed by the bank’s fund managers.
UITF is governed by a Declaration of Trust which contains the mechanics for investing, operating, and administering the fund. In the Philippines, UITF is regulated by the Bangko Sentral ng Pilipinas.

How to choose the UITF product that suits for you?

Any individual, business or entity who has the legal capacity to contract or establish a trust can invest in any UITF product.

For any person who is interested to invest in UITF, he needs to identify his needs, tolerance and investment goals. These will be matched with the investment parameters of a particular UITF product.

These parameters can be among the following:

  1.  Investment capacity – it is the amount of money available for investment.
  2. Investor risk profile – it is the investor’s appetite for risk or how much risk he is willing to take.
  3. Investment Horizon – it is the amount of time the investor can stay to hold his investments.
  4.  Investment Objective – it is the investor’s purpose for his investments. It can be capital preservation, income or capital growth.

Upon application for UITF investment, the investor will be requested by the bank to conduct the Client Suitability Assessment Test. 

Based on the result of the said test, the risk profile of the investor can be classified among the following:

  • Conservative - The conservative investor's main purpose is to generate an income at least equal to the rate of inflation. This is what we call principal protection or capital preservation. The conservative investor’s investment horizon is up to 1 year.

  •  Moderately Conservative - The moderately conservative investor looks for stable returns that are slightly higher than those of traditional term deposits. Investment horizon for this type of investor is between 1 to 3 years.

  •   Moderately Aggressive – A moderately aggressive investor’s goal is relatively higher return on his investments. This type of investor is looking a balance return between income and capital growth. This investor’s investment horizon is between 3 to 5 years.

  • Aggressive – An aggressive investor is willing to take investment fluctuations that range from capital loss over the short term to high long term gains. His main objective is capital growth by earning the highest returns possible. This type of investor’s investment horizon is more than 5 years.

With the result of the investor’s Client Suitability Assessment Test, the bank may recommend to the investor the following types of UITF that will suit his risk tolerance, time horizon and investment goals.

Fixed Income Fund

Fixed Income Fund is primarily aimed at generating an income at least equal to the rate of inflation with little or no chance of loss.

The following are the kinds of Fixed Income Funds available in the trust market.

a.       Money Market Fund

Money Market Funds are invested primarily in fixed–income securities and have duration of less than a year.

This fund is suitable for conservative investors who are looking for safe and liquid investments. The returns on these funds are usually higher than the returns on savings accounts or time deposits.

b.      Bond Fund

Bond Funds are invested primarily in bonds and may include government, corporate and municipal bonds. The objective of this kind of fund is capital appreciation and higher yields. This type of fund is suitable for moderately conservative investors who have a longer investment time horizon.

Balanced Fund

Balanced Funds aims to achieve medium to long term capital growth by investing in a mixed portfolio of stock securities and fixed-income funds.
Balanced funds were intended for investors who are looking for a blend of safety and moderate capital appreciation.

Equity Fund

Equity Funds are securities invested mostly in equities or stock investments with a small portion invested in fixed income or short term deposits.
Potential earnings from this fund profits from higher returns due to capital appreciation and dividends.

What Are the Bank’s Requirements In UITF Investment?

Prior to admission of the UITF investment application, the bank requires the investor to have the following:

  • Savings Account with the Bank – the investor must have a savings or current account with the bank. This account will serve as the investor’s settlement account for his UITF investments.

  •  Client Suitability Assessment Test – the investor is required to take the client suitability assessment test. The said test will guide the investor in choosing the best investment that suits his investment objectives, risk tolerance and investment horizon.

  •   Risk Disclosure Statement – the investor must read the Risk Disclosure Statement and understand the nature of the fund and the risks involving his investment.The investor must sign the Risk Disclosure Statement along with the Participating Trust Agreement to acknowledge his understanding of the risk involve in investing.

  •  Investment Account Application – the investor must fill up and submit the Investment Account Application form to signify his intention to invest with the fund.

After completing the mentioned documents, the investor must deposit his investment money with his settlement account. The bank will automatically debit this amount in favor of his UITF account.

The investor will receive an update from the bank regarding his investment on a regular basis through mail in the preferred mailing address he gave in the Investment Account Application form.

How Many Units of Participation Do Your Investment Is Equivalent To?

When the investment of the investor was enrolled with the fund, a corresponding unit of participation in terms of net asset value per unit or NAVPU was made for the investor.

The NAVPU during the day his investment was enrolled with the fund was derived by dividing the fund’s NAV or net asset value for the day by the number of outstanding units in the fund.

The Net asset value or NAV is the sum of the market value of the total investments of the fund minus the expenses such as taxes, fees and other valid charges.

To determine how many units of participation you acquire with your investment, you divide the total amount you invested by the NAVPU of the fund for the day.


Amount invested: P100,000.00
NAVPU: 1.0800
Units of Participation = P100,000.00 / 1.0800
Units of Participation = 92,592.60 units

The daily NAVPU of the fund is published on a daily basis through the website of the bank.

For checking the growth (or loss) of your UITF investment, visit the bank’s website and get the NAVPU of the fund for the day. Multiply this NAVPU with the units you held. The result will be the current amount of your investment.

NAVPU of the fund may vary on a daily basis. There may be a time that the NAVPU is less or higher depending on the performance of the fund.

If you intend to redeem your investments, the amount you will earn will be the difference between the value of the units of participation at the time of your purchase and the value of the units at the time you will redeem your invesments.

To have better chances of earning more, it is advisable for the investor to hold his investment on a longer period since the underlying investment outlets become less prone to market volatility over longer period of time.