Philippines UITFs

How To Invest In UITFs In The Philippines

So you’ve saved up and now you’re ready to level up financially. However, you’re intimidated by the world of investments. 

We can’t blame you, it’s a tough market to follow, with all the numbers, charts, and complex analysis that you need to be familiar with to at least make some educated guess on how an investment might perform in the long run. 

While all that is true, you don’t need a lot of money to start investing. Even if you don’t have the money or time to devote to stock picking and all the work that goes into hardcore investing, you can still enjoy the benefits of investing.

You can start by participating in Unit Investment Trust Funds (UITFs) and you can do this through your local banks.

What are UITFs?

Unit Investment Trust Funds (UITFs) refers to a group of assets which can include shares, bonds and real estate among other investments which are pooled together. This group of assets is then divided into ‘units’ which is what you buy as an investor.

The pooled funds from investors (that’s you) are then managed by professional fund managers, who invest it in different financial instruments depending on the type of UITF you’ve invested in.

Each UITF has its own Declaration of Trust which tells you how the fund is governed. The fund manager will also release quarterly and yearly reports containing a breakdown of the fund’s performance.

What types of UITFs are there?

There are four types of UITFs and they are as follows:

  1. Money market
  2. Fixed income
  3. Balanced 
  4. Equity

Money market and fixed income UITFs are more conservative, while balanced refers to a more even spread between asset classes.. In this article, we’re going to focus on the more aggressive type of UITF, which is equity

This UITF has the highest expected returns among UITFs. While it offers a high return, its risk is also higher, thus it’s recommended that you’re invested for the medium term with it (at least 1 – 3 years).

Equity UITFs invest in equities listed in the stock exchanges (hence the name). For example, Security Bank Peso Equity Fund’s top 3 holdings (as of the January 2021 performance report) are SM Investment Corporation, SM Prime Holding, and Ayala Land, Inc. Meanwhile, BDO Institutional Equity Funds (according to their December 30, 2020 performance report) are SM Investment Corporation, Ayala Land, SM Prime.

The holdings of each UITF depends on the fund’s investment strategy, which you can read about in their Declaration of Trust and regular reports.

This is good news for you because even if you just have P10,000, by investing in an equity UITF you’re diversified by default. Your investment is tied to the performance of the Philippine Stock Exchange as a whole and not just one company. Most of these equity UITFs use the Philippine Stock Exchange as their benchmark (aiming to outperform it), so if the market is doing well, your investments should be doing even better.

Below is an example of an equity fund’s performance over time compared with the benchmark (in this case, the Philippine Stock Exchange index). The dark blue line is the fund, and the yellow line is the PSE index.

UITF 2005 to 2020

Source: Philippine Stock Exchange index

How does UITF work?

You, the investor, buy “shares” or units of the fund at the market value, called Net Asset Value Per Unit (NAVPU). This value reflects the market prices of the underlying stocks. NAVPU is recalculated daily.

So let’s say the NAVPU of a certain Philippine UITF is P2.00 and you participate in the fund with P10,000. This means you get 5,000 units, and you get a certificate saying so. Now let’s say you stay invested for one year, and the NAVPU is P3.00 one year later. When you redeem your 5,000 units, you’ll receive P15,000.

How do you calculate the number of units you get for your money?

Simply divide your investment amount by the NAVPU price.
₱10,000 / ₱2 = 5000 units

But if the NAVPU went down and is now only P1.00, you’ll only be able to get P5,000 with your 5,000 units. If this is the case, you should wait until the NAVPU has recovered.

How do you participate in a UITF?

It’s as simple as walking into your bank and opening an investment fund account. The bank will usually ask you to take an assessment which measures your risk appetite, and then they’ll present you with the investment options that match.

After that, just have the minimum initial investment required on hand, and you can start investing.

Which equity UITFs should you choose?

While past performance does not guarantee future returns, you should look at the medium-term performance of UITFs over the last three years to help you decide.

Below, we’ve listed the best-performing equity funds from January 5, 2017 to January 5, 2020 that you can participate in for only ₱25,000. We’ve also added data like holding period and trust fees, as well as the return on investment from 2017 – 2020 so you can see how the fund managers have performed and what you can expect from the fund.

ATRAM Global Dividend Feeder Fund

  • Initial investment: ₱1,000
  • Minimum additional: ₱1,000
  • Holding period: None
  • Early redemption fee: None
  • Management fee: 1.00% per annum
  • Settlement period: 5 to 7 banking days 
  • ROI (Jan 5, 2017 to Jan 5, 2020): 32.0290%

Security Bank Peso Equity Fund

  • Initial investment: ₱10,000
  • Minimum additional: ₱5,000
  • Holding period: None
  • Early redemption fee: N/A
  • Trust fees: 1.50% per annum
  • Settlement period: 4 days
  • ROI (Jan 5, 2017 to Jan 5, 2020): 15.8342% 

ATRAM Asia Equity Opportunity Feeder Fund

  • Initial investment: ₱1,000
  • Minimum additional: ₱1,000
  • Holding period: None
  • Trust fees: 0.90% per annum
  • Settlement period: 5 to 7 banking days
  • ROI (Jan 5, 2017 to Jan 5, 2020): 14.3356%

AB Capital Equity Fund

  • Initial investment: ₱25,000
  • Minimum additional: ₱10,000 
  • Holding period: 30 calendar days
  • Early redemption fee: 1% of the principal
  • Trust fees: 1.25% per annum
  • Settlement period: 3 banking days
  • ROI (Jan 5, 2017 to Jan 5, 2020): 13.2637%

Security Bank High Dividend Peso Equity Fund

  • Initial investment: ₱10,000
  • Minimum additional: ₱5,000
  • Holding period: None
  • Early redemption fee: N/A
  • Trust fee: 1.50% per annum
  • Settlement period: 4 banking days from redemption
  • ROI (Jan 5, 2017 to Jan 5, 2020): 11.0894%

Before investing in UITFs, remember that none of the returns are guaranteed, so have an emergency fund first so that you’re covered if the worst does happen to your investments.

When the time comes to choose a UITF to invest in, go with the one that most matches your risk appetite and looks set to provide you with the best returns based on historical performance.

This article was first published in January 2015 and has been updated for freshness, accuracy, and comprehensiveness.

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