Why Invest in UITFs?


In recent years, the Philippine per capita gross domestic product has been growing, largely as a result of fiscal developments and the inflow of funds from Overseas Filipinos. As our country becomes economically developed and its populace subsequently wealthier and more sophisticated, it will follow the trend worldwide wherein in an improving economy, there is a noticeable interest in the money and capital markets where investors are able to share in the growth of the economy and participate in the profits of the more established companies.

While investing in the capital markets has traditionally been only for people with large portfolios and the expertise to manage risks and pursue higher returns, pooled funds like the Unit Investment Trust Fund (UITFs) have enabled a wider number of people to participate in these markets.

In view of these, we discuss herein the important reasons why an investor may want to consider putting his money in a UITF.

There is potential for higher returns

UITFs offer investors an opportunity to potentially earn higher returns. By its nature, UITFs pool the funds of investors to create a large fund which, under the watchful eyes of professional fund managers, can productively harness these funds, taking advantage of economies of scale. UITFs are thereby able to provide even smaller investors access to the financial markets for investments which normally are just available to big investors. Due to its size, UITFs are also able to reduce transaction costs.

Given these reasons, UITFs have historically provided investors better returns over a longer-term horizon when compared to traditional deposit options. However, fund managers and BSP are quick to add that historical performances of funds are not guarantees of future fund performances. Furthermore, given the marked-to-market valuation standards used, the investment values of UITFs may experience fluctuations in value that may be temporary but can result in investment losses if an investor has to redeem at a time when the financial markets are turbulent. Thus, the potential for higher returns is also accompanied by higher risks.

The UITFs allow an investor to select risks suited to him

The BDO UITF product suite offers a whole range of UITFs from which an investor can choose one or a combination thereof, to meet his particular investment and return objectives coupled with the level of risks that he is willing to take. There are UITFs for the conservative, the moderate and the aggressive investor and each UITF is governed by a Declaration of Trust (DOT) which defines its investment objectives and the investments allowed for that particular UITF to meet such objectives.

The UITFs have built-in safeguards to protect investors

Investors can take comfort in the fact that the BSP exercises vigilant supervision over UITFs. This product was created by BSP Circular 447, dated September 3, 2004 and was further improved with the issuance of BSP Circular 593, dated January 8, 2008. As these circulars were issued recently, these regulations on UITFs are updated and aligned with international best practices. Such practices include the use of marking to market as its valuation basis, the requirement for third party custodian to safekeep and value the securities held in its portfolio, the separate external audit of each of the UITFs by an accredited independent external auditor as well as limiting UITF investments in bank deposits, government securities, securities traded in an organized exchange or approved by the BSP for UITFs and always must be done abiding by the best execution rule. Moreover, the regulations require that marketing personnel of the UITFs be adequately trained to ascertain that investors are properly informed of the nature and risk of UITF investing and matched with the appropriate UITF investment. All these were promulgated with investor protection as the ultimate aim.

Experience these benefits first hand! Review the features of each BDO UITF and allow our Trust Marketing Personnel to guide you in choosing the UITF best suited for you to meet your financial goals.