Millennials are now considered the country’s next super investors considering their growing interest in the real property market. But investing in real property demands a larger capital. Thus, investments like a unit investment trust fund or UITF in the Philippines allow you to earn passive income even with a small amount to start with.
Although UITFs pose risks like any other type of investment, they also offer a lot of benefits to your growing fund. If you're interested to know more about UITF, read on and learn how it can jump-start your investment journey.
What’s a Unit Investment Trust Fund?
Not sure what the UITF meaning is? Simply put, a UITF is a pool of investments funded by various investors. Each UITF in the Philippines is different, considering its plan rules or Declaration of Trust that defines all the mechanics of investing, managing, and operating the pool of funds.
How Does a UITF Work?
You can think of it as a basket with different fruits—one basket may contain mangoes, the other may contain pineapples, and another may contain a combination of two fruits. In the case of a trust fund, various holdings, instead of fruits, make up the investment.
As with a fruit basket wherein you can decide which fruits to buy, professional fund managers handle and manage the holdings of UITFs. Since these professionals actively manage the fund, once you’ve set them up, you can sit back, relax, and make your money work for you.
What are the Different Features of a UITF?
Not all UITF investments in the Philippines are the same. Each UITF product differs depending on the following features:
- Investment objective
- Portfolio mix
- Types of assets invested in
- Settlement period
- Benefits and risks
- Minimum holding period
Investing in a UITF lets your money grow through diversified products and markets. And since investment objectives differ from one UITF product to another, the benefits, charges, risks, and other rules governing your investment may affect your investment journey.
Different Types of UITFs in the Philippines
There are four kinds of UITFs in the Philippines. Familiarize yourself with them below.
Money Market Funds
Money market UITFs have special deposit accounts and time deposits that mature at a specific date (usually a year or less). The yield you’ll get from money market UITFs is higher than what you’ll get from the interest in your savings account.
This type of unit investment trust fund is suitable for conservative investors who don’t want to expose themselves to risk. Even though UITFs, including money market funds, are not insured by the Philippine Deposit Insurance Corporation (PDIC), money market trust funds in the Philippines are considered much safer than other types of UITFs in the market.
Bond UITFs have both government (fixed-rate treasury notes) and retail treasury bonds, as well as corporate bonds with longer maturity dates than money market funds. Bonds are considered IOUs (I owe you) since they’re debts wherein you, the lender, lend money to a borrower. The borrower can be the government or a corporation. These borrowers take on debt in the form of bonds to fund projects that will drive an entity’s growth.
Bonds are suitable for moderately conservative investors who want to take on minimal risk and experience higher returns.
Read more: 5 Smart Reasons to Invest in Bonds
Balanced funds contain both conservative securities (fixed-rate treasury notes and bonds) and riskier ones such as stocks. This type of unit investment trust is suitable for moderately aggressive investors who are willing to take on more risk by investing in stocks, but at the same time want to minimize risk by including more conservative securities such as bonds.
Stocks or Equities
Equity UITFs are 100% stocks. Unlike investing in the stock market where you individually buy stocks and create your own stock portfolio, equity UITFs already have a pool of stocks, including some of the country’s largest corporations like Ayala Land, SM Prime Holdings, and PLDT, among others.
This type of unit investment trust fund is suitable for aggressive investors who are willing to take risks to experience much larger yields yet don’t have the time and knowledge to invest in individual stocks.
How do I Earn from UITF in the Philippines?
Your unit investment trust fund can be invested in stocks and bonds to make a profit. Your fund manager will do most of the leg work on behalf of you and other investors. The fund earns through a stock price increase, interest, and dividend.
Read below what these terms mean:
- Stock price increase - Your UITF will earn money when the company shares you invested in increase price. This can happen if there are many investors attracted to the company’s prospects, such as business projects and expansions.
- Dividend - This is a sum of money that a company gives to its shareholders out of its profits. The company can choose to release some of its annual profits to shareholders, such as yourself, or invest it back into the business.
- Bonds - If your UITF in the Philippines is invested in bonds, you’ll earn a profit when the borrower pays the interest. Bonds are issued as proof of indebtedness by both private companies and the government.
Pros and Cons of Investing in UITF
Before investing in UITF, you need to be aware of its advantages and disadvantages. This can help you make an informed decision regarding where you allot your money.
Pros of UITFs
- Easy way to earn passive income
- Investment capital of as low as ₱5,000
- Diverse investment in various industries and companies
- A professional fund manager will do the legwork for you
Cons of UITFs
- Your return on investment varies
- Not guaranteed or insured by the Philippine Deposit Insurance Corporation
- Units don’t give shareholders rights, unlike in stocks
- You can’t control where you invest your money. The fund manager decides which assets to buy.
What are the Risks of Investing in UITF in the Philippines?
Investing in UITF in the Philippines comes with several risks you should be prepared to face.
- Price risk - This is most common to bonds and equities which are affected by the current market prices. An investor may face losses if market prices go down.
- Interest rate risk - This refers to the losses caused by fluctuating interest rates.
- Liquidity risk - Investors should anticipate when assets can't be sold or converted into cash.
- Credit risk - Investors may lose money when a borrower fails to repay the interest or principal of securities issued.
Is UITF the Right Investment for Me?
The unit investment trust fund is just one of the many ways you can invest your hard-earned money and make passive income. However, before you go to the nearest bank, you need to think this decision through. Here are some of the factors you should consider.
Before deciding to invest in a unit investment trust fund, evaluate your goals. Why do you want to invest in trust funds? What’s your risk tolerance? How much do you want to invest? Look at the bigger picture and how this investment can help you reach your financial goals.
Many companies offer this type of investment, so it’s best to narrow down your choices. Make sure the company is SEC-regulated. Visit the company in person and inquire about its unit investment trust funds. Don’t be afraid to ask them more questions if you have any as it will help you better understand where you’re investing your money.
Type of UITF
Do you want to invest in stocks? Bonds, perhaps? Your financial goals and risk tolerance can help you choose the best type of trust fund to invest in. You can also talk to a bank representative about your choices.
How to Invest in UITF in the Philippines
Here are simple steps to get you started with a unit investment trust fund:
- Visit your preferred bank’s nearest branch.
- Tell the representative that you would like to invest in UITF.
- Accomplish the Client Suitability Assessment test to determine which trust fund best fits your risk tolerance.
- Fill out an application form and present your valid ID.
- Wait for your application to be processed.
- Once you’re all set, monitor your investment. Talk to your fund manager about your unit investment trust fund.
If you’re opening a UITF or investment account in the same bank where you have a savings or deposit account, you can subscribe or buy more units via your online account. However, you should have enough funds in your savings or deposit account.
Some banks also offer regular subscription plans where the money from your deposit account is automatically transferred to your investment account regularly.
Fees and Charges Involved
When you invest in UITF, you have to be aware of the following fees and charges:
- Service fee or trust fee of 0.5 to 1.5% charged to the fund
- Sales charge of up to 2% of the NAVPU
- Withholding tax of 20% on capital gains
- Exit fee of up to 1.50% charged to the fund if you fail to follow the holding period
Your bank may charge you additional fees apart from the fees and taxes listed above. Ask your bank representative about UITF fees before submitting your application.
What is NAVPU?
So what about the NAVPU meaning? NAVPU or Net Asset Value Per Unit is the unit price or the current net market value of the fund. You can compute your NAVPU by taking the total market value of the investment fund minus the expenses and liabilities. Then, divide the result by the total number of units of participation.
Formula to Get NAVPU
NAVPU = total market value of the investment fund - expenses and liabilities
Divided by total number of units of participation
For example, the total market value of the investment fund is ₱40 million, and it has ₱20 million on expenses and liabilities. The UITF also has a total of 700,000 units of participation.
The NAVPU computation should be computed like this:
NAVPU = (₱40 million - ₱20 million) ÷ 700,000
The NAVPU is ₱28.57. This means if you purchased your UITF for ₱28.57 per unit, you need to sell it at a higher price than that. That’s how you earn in UITF investing.
How to Compute UITF Earnings
Multiply the daily NAVPU with the number of units you have. Your return on investment (ROI) is the difference between the current amount of your investment minus the principal amount you invested. Here’s a simple formula to get your ROI:
ROI = (your number of units of participation x current NAVPU) - the principal amount you invested
Let’s say your principal amount of investment is ₱45,000 and has 15,000 units, and the current NAVPU is ₱4.50. Your ROI would be computed as follows:
ROI = (15,000 x ₱4.50) - ₱45,000
67,500 - ₱45,000 then your ROI would be ₱22,500
What are the Top UITFs in the Philippines?
Knowing the performance of a UITF in the Philippines will help you decide where to invest your money. Here are the top funds you can consider for 2022.
|1. Maybank Philippines Inc||Maybank Tiger Peso Money Market Feeder Fund||1.28%|
|2. CTBC Bank (Philippines) Corp.||CTBC Money Market Fund||1.26%|
3. BPI Asset Management and Trust Corporation
|BPI Invest Money Market Fund||1.17%|
|4. China Banking Corporation||China Bank Short-Term Fund||1.07%|
|5. Robinsons Bank||RBank Peso Money Market Fund||1.06%|
|6. EastWest Banking Corporation||Eastwest Peso Money Market Fund||1.04%|
|7. Security Bank Corporation||SB Peso Money Market Fund||0.94%|
|8. Bank of Commerce||Diversity Money Market Fund||0.88%|
|9. Rizal Commercial Banking Corporation||RCBC Peso Short Term Fund||0.84%|
|1. Robinsons Bank||RBank Balanced Fund||8.16%|
|2. China Banking Corporation||China Bank Balanced Fund||7.10%|
3. Manulife Investment Management
|Manulife Global Multi-Asset Diversified Income Feeder Fund (PHP Unhedged Class A)||5.59%|
|4. Philippine Bank of Communications||Best Balanced Fund||4.50%|
|5. AB Capital Asset Management||AB Capital Balanced Fund||4.39%|
|6. United Coconut Planters Bank||UCPB Balanced Fund (Formerly United Balanced Fund)||4.21%|
|7. Manulife Investment Management||Manulife Global Preferred Income Feeder Fund (PHP Unhedged Class I)||3.65%|
|8. BPI Asset Management and Trust Corporation||BPI Invest Balanced Fund||3.34%|
|9. LandBank of the Philippines||LANDBANK Growth Fund||3.28%|
|1. Philippine National Bank||PNB High Dividend Fund||21.16%|
|2. ATRAM Trust Corporation||ATRAM Philippine Sustainable Development And Growth Fund (Y Unit Class)||18.92%|
3. ATRAM Trust Corporation
|ATRAM Philippine Sustainable Development And Growth Fund (A Unit Class)||17.37%|
|4. Rizal Commercial Banking Corporation||RCBC R25 Dividend Equity Fund||14.93%|
|5. Manulife Investment Management||Manulife Global Healthcare Equity Feeder Fund (PHP Unhedged Class A)||14.27%|
|6. Manulife Investment Management||Manulife American Growth Equity Feeder Fund (PHP Unhedged Class A)||13.90%|
|7. China Banking Corporation||China Bank High Dividend Equity Fund||13.53%|
|8. Philippine Bank of Communications||Value Equity Fund||12.75%|
|9. China Banking Corporation||China Bank Equity Fund||12.71%|
Trust entities offering pooled fund investments are required to publish their return of investments year-on-year. The year-to-date ROI is the absolute returns earned by the fund within the period covered. Investors may consider the historical performance of each fund, but this doesn’t guarantee that the fund will earn the same way in the future.
GInvest as a UITF Platform
GInvest  is an investment marketplace of the e-wallet GCash. Through GInvest, GCash users can put their money in several funds including ATRAM Peso Money Market Fund, ATRAM Total Return Peso Fund, ATRAM Equity Smart Index Fund, ATRAM Global Technology Feeder Fund, and ATRAM Consumer Trends Feeder Fund.
Recently, GCash also added access for investors to ALFM Global Multi-Asset Income Fund and Philippine Stocks Index Fund.
|Investment Product||NAVPU as of January 2, 2022||Minimum Buy Order Amount||Risk Appetite|
|ATRAM Global Technology Feeder Fund||₱212.27||₱1,000||Aggressive|
|ATRAM Global Consumer Trends Feeder Fund||₱147.70||₱1,000||Aggressive|
ATRAM Philippine Equity Smart Index Fund
|ATRAM Total Return Peso Bond Fund||₱127.22||₱50||Moderate|
|ATRAM Peso Money Market Fund||₱110.70||NA||NA|
|Philippine Stocks Index Fund||₱1,018.95||₱50||Aggressive|
|ALFM Global Multi-Asset Income Fund||₱45.50||₱1,000||Aggressive|
FAQs about UITF in the Philippines
1. What document serves as proof that I’m a UITF investor?
Every UITF investor will be provided with a Participating Trust Agreement which serves as proof that you’re interested in participating in the pool of funds. Upon acceptance of the agreement, you’ll be given a Declaration of Trust with a Confirmation of Participation indicating the amount you invested, the NAVPU on the date of participation, and the number of units of participation.
2. Can I invest in multiple UITFs?
Yes. You’re free to invest in many types of UITFs as long as you understand all the terms and conditions and the fund’s objectives suit your financial goals.
3. How do I determine my gains and losses from a UITF product?
You’ll know your gains and losses by comparing the number of units you owned from the beginning against the number of units you have at present.
4. When do I get the gains from my UITF investment?
Payment of gains to every investor depends on the agreement and settlement period specified at the beginning of the investment.
5. Are earnings from UITFs guaranteed?
No. UITFs aren’t considered bank products and income from the principal investment isn’t guaranteed.
6. What’s a unit of participation in UITF?
Once you invest in UITF, you’ll be granted a unit of participation that represents your pro-rata share in a pool of funds. A unit of participation is your share in all the investments of the UITF product. It doesn’t represent your share in a particular investment.
With a unit investment trust fund, you don’t have to actively handle your funds. There’s no need to conduct fundamental and technical analyses as you do in stocks. You also don’t have to check your UITF’s performance by the hour since professional managers do that for you.
When investing in UITF in the Philippines, make sure to check your online investment account regularly. And when the time comes that you’re ready to withdraw your investments, you’ve given truth to the statement ‘make your money work for you!’