FAQs - Trust
- What is a UITF?
A Unit Investment Trust Fund (UITF) is an open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trust entity and made available by participation. Each UITF product is governed by a Declaration of Trust (or Plan Rules) which contains the mechanics for investing, operating and administering the fund.
- What does "open-ended pooled trust fund" mean?
An open-ended trust fund allows clients to invest or redeem their investments at any time subject to guidelines set forth in the UITF Declaration of Trust. Funds from various clients with similar investment objectives are pooled together into one fund, which the trustee invests in various types of securities with the aim of maximizing returns within reasonable risk levels.
- What does "made available by participation" mean?
A client invests in a UITF by purchasing units of participation in the fund. The units of participation represent the investor's proportionate share in the total value of the fund. As an investor in the fund, the client does not own any specific asset of the fund, only a proportionate share in all the fund's assets.
- At what price may these units of participation be purchased?
Units of participation are made available to investors based on the Net Asset value Per Unit (NAVPU) of the fund for the day. The NAVPU is delivered by dividing the fund's Net Asset Value (NAV) by the number of outstanding units in the fund. NAV, on the other hand, is the sum of the market value of the investments of the fund less expenses such as taxes, fees and other qualified charges. To determine how many units of participation a certain amount of investment is equivalent to, simply divide the amount to be invested by the prevailing NAVPU for the day.
- How different is UITF from a CTF?
The main difference between a UITF and a CTF is the manner in which the NAV is calculated. CTFs are valued using the accrual method (i.e. NAV of the fund takes into account principal and interest accruing from various investments of the fund). This method generally results in a steadily increasing NAVPU. UITFs, on the other hand, follow the marked-to-market valuation method which calculates the NAV based on the estimated fair market value of assets of the fund based on prices supplied by independent sources. The marked-to-market value takes into account the accrued interest (and dividends where the fund is invested in equities) plus unrealized gains or losses of the investments given their prevailing market prices. As such, UITF NAVPUs may fluctuate depending on the volatility of the prices of various assets held by the fund.
- Why was there a need to change the valuation methodology?
The marked-to-market valuation provides investor with a more accurate and fair value of his investments at any given time. It ensures that no participant in the fund is put at a disadvantage as a consequence of new investors coming in or of existing investors getting out of the fund. The marked-to-market methodology is in accordance with international best practices.
- Are all UITF products offered in the market the same?
No. UITF products differ in terms of portfolio mix, minimum investment amount, minimum holding period, settlement period and charges. For example, some UITFs are invested purely in fixed income securities while others may have investments in equities or stocks. Each product is governed by a specific Declaration of Trust, which contains these product mechanics. The client should choose a UITF product suitable to his investment needs.
- What are the types of UITFs available in the market?
UITFs are established and managed based on a set of investment objectives and strategies, and these have varying levels of risks and returns. Among the most common types of funds in the market are:
- Money Market Fund - These funds are for investors who are looking for a conservative way to invest their funds. The investment objective here is capital preservation while giving the client easy access to their funds.
- Fixed Income Fund - These funds are also aimed towards capital preservation. The investments include government securities, bonds and other fixed income funds are also subject to market volatility depending on the interest rate trends.
- Equity Fund - The purpose of these funds are to maximize returns by going into equities or stock investments and dividend earnings. Clients investing in this type of fund should, however, be willing to take the risks attached to investing in equities. A longer investment horizon is recommended in investing in an equity fund.
- Balanced Fund - These funds are invested in a mix of equities and fixed income securities. It is aimed at preserving capital as well as generating additional yields from potential gains on stock investments.
- Can a client invest in more than one type of UITF?
Yes. Clients may diversify their investments across various UITFs as long as the objectives of the fund are suitable to their requirements.
- Which type of UITF is suitable to an investor?
When choosing a UITF, you should identify your needs and goals and match them against the investment parameters of the product. To determine the clients' suitability to a fund, the following factors have to be considered: investment capacity (amount available for investment), investment horizon (how long a client can stay in the fund), risk profile (how much risk is the client willing to take) and investment objectives (whether client wants current income or capital growth).
- Who can invest in a UITF?
Any person, association, corporation, entity or firm who/which has the legal capacity to contract or establish a trust may invest in a UITF product.
- Is there an indicative or guaranteed rate of return for UITF products?
Since UITFs are subject to marked-to-market valuation method, the NAVPU may fluctuate depending on the volatility of the market. As such, indicative rates cannot be quoted by the trustee. Yields are variable and cannot be guaranteed. Historical performance of the fund may provide an indication of how well the trustee is managing the fund but this is not a guarantee of future performance.
- How do investors keep track of the value of the UITF investment?
The NAVPU of the fund is generally made available on a daily basis (or as prescribed in the Declaration of Trust) at the office of the trustee, its branches or through the trust entity's website. To determine the value of the UITF investment, simply multiply the NAVPU by the number of units of participation acquired.
Units x Bid Price = Market Value of Investment
- How much will an investor get when the UITF investment is redeemed?
The investor can calculate the proceeds of his UITF investment by simple multiplying the number of units being redeemed by the applicable NAVPU for the day. Generally, the NAVPU is already net of trust fees, taxes and qualified charges. However, there may be additional charges the client such as early withdrawal charges in cases where the client redeems his UITF investment prior to the completion of the minimum holding period required by the trustee.
- How does a participant determine how much he earned from the UITF?
The difference between the value of the units of participation at the time of purchase and the value at the time the units are redeemed determines how much an investor earned from the UITF investment. As the fund value increases, each participant earns more. Also, the longer a client stays invested in the fund, the better his chances of earning more since the underlying investment outlets become less prone to market volatility over time.
- When does an investor get the proceeds of the UITF investment?
Payment to the investor will depend on the settlement period prescribed by the trustee. This may vary depending on the nature and settlement convention of the investments of the UITF product.
- What instruments can a trustee invest in?
The character and kind of investments which may be made by the trustee depend on the investment parameters set forth in the UITF Declaration of Trust or Plan Rules. BSP regulations, however, prescribe that UITF fund investments shall be limited to:
- Bank deposits
- Securities issued by or guaranteed by the Philippines government or the BSP
- Tradable securities issued by the government of a foreign country, any political subdivision of a foreign country or any supranational entity
- Exchange listed securities
- Marketable instruments that are traded in an organized exchange
- Loans traded in an organized market
- Such other tradable investments as the BSP may allow
- How will an investor know where the fund is invested?
A list of prospective and outstanding investment outlets shall be made available to the UITF clients. The list of investment outlets shall be updated quarterly.
- How can an investor compare the performance of the trustee versus other entities?
All trust entities offering UITF products are required to publish the fund's prevailing NAVPU as well as the year-on- year and year-to-date return on investment in major dailies at least one a week. The investor should, however, compare performance of products with similar investment parameters for a more objective evaluation.
- How much do trustees charge UITF investors?
The trustee shall charge the fund for management fees, taxes and qualified expenses. The management fee shall differ for each type of fund and will cover the costs of investment research, management, marketing and routine administrative expenses of the trustee.
- What are the risks of investing in a UITF?
Because assets of the UITF are valued based on prevailing market price, there is a possibility of incurring losses in the UITF if the client withdraws in a scenario of generally declining market prices. Clients may, however, opt to defer their withdrawals until market conditions become more favorable. Being a trust product, There is no guaranty on the principal and income of the investments and losses, if any, shall be for the risk of the UITF investors. UITFs are governed by BSP regulations but are not deposit products, hence are not covered by the Philippine Deposit Insurance Corporation (PDIC)
- Why should one invest in a UITF?
Investors in UITF can avail of the following benefits:
- Diversification. By Participating in a UITF, risks are spread out across the various investments held by the pooled trust fund. Diversification comes in the form of various types of investments, issuers and tenors. UITFs are required to observe its exposure in a single entity and its related parties to 15% of the market value of the fund, except in the case of government securities.
- Liquidity. While it is advisable to stay invested in the UITF for a longer period of time, clients can redeem units of participation at any time. The fund will not have difficulty redeeming such units of participation because UITF investments are limited to marketable or tradable securities.
- Affordability. UITFs generally have low minimum investment requirements. Additional investments may be made in tranches as funds become available to the client.
- Better earnings potential. Greater earnings potential is achieved without having to invest large sums of money. There are opportunities for potentially higher returns due to possible marked-to-market gains on top of accrued income from investments. UITFs provide access to financial instruments not readily available to retail investors.
- Exempt from Reserve Requirements. UITFs are not subject to reserve requirements imposed on bank deposits and CTFs.
- Professional Fund Management. Participating in a UITF allows clients to gain access to the expertise and services of seasoned fund managers who are able to actively monitor the market for possible investment opportunities.
- Transparency. Trust entities are required to publish the UITF NAVPU at least weekly, allowing you to compare investment performance of various fund managers. Each is subject to a separate annual audit by an independent auditor acceptable to the BSP, the results of which may be made available to investors.
- Regulated product. The management and administration of UITFs are governed by the Bangko Sentral ng Pilipinas.
- How do you invest in a fund?
In order to invest in a fund, a person must buy shares or units of participation in the fund. The value of one unit is calculated by dividing the current net market value of the underlying investments in the fund by the number of outstanding units. The market value of the entire fund is equal to the market value of all the securities in the fund. This is known as Net Asset Value or NAV. By dividing the NAV by the number of outstanding units, we get the NAV per unit of participation or NAVPU. The NAVPU is the price the investor must pay for one share or unit of participation.
NAV per Unit = NET ASSET VALUE
Total Outstanding Units
- How do you measure each UITF's performance?
The fund's daily Net Asset Values per unit are compared against a benchmark. A benchmark is normally an index or collection of different securities. In choosing the right benchmark for a fund, it is important that the benchmark and the fund are composed of similar securities. In other words, you must compare "apples to apples." Upon inception of the fund, an index placing the fund in proportion to the benchmark is constructed and the selected benchmark is set to have a NAVPU equal to the fund's initial NAVPU. Whenever the fund's value is greater than that of the benchmark, the fund is said to be outperforming the benchmark. If the fund's value is below that of the benchmark, then the fund is underperforming. Usually, the fund's Return objective is to outperform the benchmark, gross of any fees and expenses incurred in its management.
- How can I monitor the fund's performance?
UBP-TISG posts the NAV in its website daily. Investors can also monitor the fund performance through regular publication of the NAVPu by the Trust Officer Association of the Philippines (TOAP) on a weekly basis in a newspaper of national circulation.
- When does the investment mature?
There is no exact time horizon for UITFs. The funds have the flexibility to enter and exit at any time, subject to the holding period.
- Why UnionBank Trust and Investment Services Group as Fund Manager?
- Professional Management
- Outstanding Returns
- Consistently outperformed the Phisix and other Benchmarks
- Technical expertise
- What Funds does UnionBank Trust and Investment Services Group offer?
We have various funds to suit your needs. Please refer to theProductssection.
- How do I invest in UITF with UnionBank Trust Investment Services Group?
The Investor subscribes, or purchases, Units of Participation in the UITF through an instruction given to our branches, who then relays the instruction to UnionBank Trust Investment Services Group. The purchase is made at the Net Asset Value per Unit (NAVPU) of the UITF, which is calculated by the end of the day.
- How do I redeem my units from UITFs?
The Investor redeems, Units of Participation in the UITF through an instruction given to our branches, who then relays the instruction to UBP-TISG. The redemption is made at the Net Asset Value per Unit (NAVPU) of the UITF, which is calculated by the end of the day.
- When are NAVPUs calculated? Would I know my NAVPU before I invest?
The fund's Net Asset Value per Unit (NAVPU) is calculated at the end of the day. This means that if an investor is able to buy into the fund before the cut-off time for the day, he will only find out his NAVPU the following day.
- What is Duration?
Modified Duration is the percentage price change of a fixed income instrument for a given change in the level of interest rates. Duration of 1 means that the price of a fixed income instrument is expected to change by 1% for every 100 basis point (1%) shift in the level of interest rates. The higher the duration of an instrument, the higher its risk (all other factors kept equal).
Interest rates have an inverse relationship with fixed income prices so that an increase in interest rates generally leads to a decrease in fixed income prices and vise versa.
- What is Value-at-Risk (VAR)?
Value-at-Risk (VaR) is an estimate of the magnitude of loss that a portfolio can experience within a given period of time under certain probability assumptions, or confidence level. For example, a portfolio VaR of 5% within 1 day under a 99% confidence level means that there is 99% certainty that the maximum possible loss a portfolio can experience in 1 day is 5% of its value. Said in the reverse, portfolio losses greater than 5% of its value in 1 day are possible, but the probability of such occurrence is less than 1%.
VaR is often used as a risk measurement tool in portfolio management. The VaR of a portfolio varies depending on the kinds of assets put into the portfolio and their correlation to each other. Portfolios with lowly-correlated assets (i.e. diversified portfolio) tend to have a lower VaR than portfolios with highly-correlated assets. Examples of assets with a traditionally low correlation to each other are stocks and bonds – i.e. when stock prices increase, bond prices normally decrease and vise versa.
- What is Confidence Interval (CI)?
Confidence Level is a statistical range with a specified probability that a given parameter lies within the range. It is a range constructed from sample data (i.e. past observations). A 99% confidence level gives 99% certainty that values would fall within the specified range.