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:
- Investment capacity – it is the amount of money available for investment.
- Investor risk profile – it is the investor’s appetite for risk or how much risk he is willing to take.
- Investment Horizon – it is the amount of time the investor can stay to hold his investments.
- 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 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.
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.
Example:
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.