Unit Investment Trust Funds (uitf)

[mr.bukol]

thanks

 

DR.PEPPER

[Dr_PepPeR]

thanks

 

DR.PEPPER

 

If you have specific questions, please feel free to ask. Have a nice day sir.

[URRABI]

**************** WARNING ******************

I am by no means an expert nor do I play one on TV

************* END OF WARNING ***************

 

my take on the UITF vs mutual funds issue, based on my research...

 

Mutual funds:

1. managed by an investment company

2. stricter regulations

* governed by Investment Company Act of the Philippines

* regulated by the SEC; investment companies are required to submit regular reports to the SEC

* mutual funds professionals need to be licensed

 

UITF:

1. managed by the bank

2. less regulations

* no specific provisions governing UITFs

* banks are not required to submit regular reports

* bank personell selling UITFs are not required to be licensed

 

to doc, and others more knowledgeable than I...would you say the points above are accurate?

 

thanks.

urrabi

[pogi1119]

Interest rates are presently at an all time low. This means Money Market and Bonds UITFs may be steadily slow going up even if they are Mark to Market

 

Thus you may want to consider Mixed Funds UITF's. 50-50 up to 70-30 mix of Fixed Income and Blue Chips Stocks, depending on the bank. IF you have been monitoring the stock market, particularly the index (which is affected by the Blue Chips) then you will be quite comfortable with this. If you are not the stock market type or have limited knowledge, suggest you first ask people who do.

 

The reward potential is great here but you must also know how to manage your risk: Meaning knowing when to come in, how long to stay, when to get out, and how long to wait before going in. This is kinda like playing stocks but on a very general level as you are consdiering the average of the Blue Chips and lest you forget, the the Fixed Income funds which actually comprise the majority of the said Balanced Funds.

 

Lastly considering the PSE Index's "very interesting" movements for the past weeks, you may want to consider investing in the Index Funds, which only a few banks offer. Here you are considering the index fund's movements ONLY.

[Talley]

**************** WARNING ******************

I am by no means an expert nor do I play one on TV

************* END OF WARNING ***************

 

my take on the UITF vs mutual funds issue, based on my research...

 

Mutual funds:

1. managed by an investment company

2. stricter regulations

* governed by Investment Company Act of the Philippines

* regulated by the SEC; investment companies are required to submit regular reports to the SEC

* mutual funds professionals need to be licensed

 

UITF:

1. managed by the bank

2. less regulations

* no specific provisions governing UITFs

* banks are not required to submit regular reports

* bank personell selling UITFs are not required to be licensed

 

to doc, and others more knowledgeable than I...would you say the points above are accurate?

 

thanks.

urrabi

 

Good day Urrabi,

 

(Brief intro : As a realtor, stockbroker and registered financial planner, I create financial plans for individuals. Consequently, I deal in/with stocks, UITF's, mutual funds, pre-need plans and practically every financial product available locally. I also write a column for a local business paper on how people can invest their money.)

 

For the most part, you understood correctly. However, I must point out that the part about who is stricter or better regulated will definitely be open to debate. The main knock versus the SEC is that it is quite slow to act plus a lot of politics goes into the selection of the commissioners. As for the BSP, the main criticism is that it protects banks more than the individual depositor since most BSP officers are former bankers themselves and thereby hesitant to drop the hammer on their compadres.

 

As for the two products, the Philippines is practically the only country that treats them differently. This is because both products are what we term as "pooled funds" and operate pretty much the same way. Some differences though are the following:

 

First, mutual funds usually charge a sales load. By this I mean that they will charge the investor a certain percentage either when the initial deposit is made or when the funds are withdrawn.

Second, mutual funds do not usually have a lock-in period. You can add / subtract funds pretty much whenever you like. However, as I mentioned, there is a fee for either every deposit or withdrawl. (In some cases both.) Quite a number of UITF's have minimum holding periods.

Third, mutual funds can be availed of for as low as 5,000 to 10,000 pesos. I am not sure about UITF's but the ones I've dealt with usually have minimums of 50,000 pesos up.

Fourth, performance wise, they pretty much approximate each other. However, I believe that in recent years, mutual funds as a whole have performed slightly better than UITF's. Not by a big amount, but enough for those people who count every cent.

Fifth, people who sell mutual funds require a license while UITF's do not. What this means is that if you believe that a mutual fund agent misrepresented the product to you, you have the legal recourse of going after the person's license. By the way, that license has to be renewed annually. As was seen by what happened earlier this year, people who felt that agents misrepresented UITF's to them had no legal recourse as the BSP essentially said that it was their fault for not reading the fine print.

Bottom line : Neither product is inherently better than the other. It all boils down to two things : The skill of the management team running the particualr fund and what your financial goals / objectives are.

[Dr_PepPeR]

Good day Urrabi,

 

(Brief intro : As a realtor, stockbroker and registered financial planner, I create financial plans for individuals. Consequently, I deal in/with stocks, UITF's, mutual funds, pre-need plans and practically every financial product available locally. I also write a column for a local business paper on how people can invest their money.)

 

For the most part, you understood correctly. However, I must point out that the part about who is stricter or better regulated will definitely be open to debate. The main knock versus the SEC is that it is quite slow to act plus a lot of politics goes into the selection of the commissioners. As for the BSP, the main criticism is that it protects banks more than the individual depositor since most BSP officers are former bankers themselves and thereby hesitant to drop the hammer on their compadres.

 

As for the two products, the Philippines is practically the only country that treats them differently. This is because both products are what we term as "pooled funds" and operate pretty much the same way. Some differences though are the following:

 

First, mutual funds usually charge a sales load. By this I mean that they will charge the investor a certain percentage either when the initial deposit is made or when the funds are withdrawn.

Second, mutual funds do not usually have a lock-in period. You can add / subtract funds pretty much whenever you like. However, as I mentioned, there is a fee for either every deposit or withdrawl. (In some cases both.) Quite a number of UITF's have minimum holding periods.

Third, mutual funds can be availed of for as low as 5,000 to 10,000 pesos. I am not sure about UITF's but the ones I've dealt with usually have minimums of 50,000 pesos up.

Fourth, performance wise, they pretty much approximate each other. However, I believe that in recent years, mutual funds as a whole have performed slightly better than UITF's. Not by a big amount, but enough for those people who count every cent.

Fifth, people who sell mutual funds require a license while UITF's do not. What this means is that if you believe that a mutual fund agent misrepresented the product to you, you have the legal recourse of going after the person's license. By the way, that license has to be renewed annually. As was seen by what happened earlier this year, people who felt that agents misrepresented UITF's to them had no legal recourse as the BSP essentially said that it was their fault for not reading the fine print.

Bottom line : Neither product is inherently better than the other. It all boils down to two things : The skill of the management team running the particualr fund and what your financial goals / objectives are.

 

Just to add a few things to an excellent reply by Talley:

 

1. The sales load of mutual funds answer for the agent's commissions, advertising, and other expenses of the mutual fund company. For banks, there is no need for this since the bank's own infrastructure is used and no commissions are required.

 

2. There are UITFs that have a minimum of P1,500 initial investment, although the retail UITFs can start at P5K - 10K.

 

3. Different mutual funds perform differently, same with UITFs so this could be a toss up.

 

4. UITF marketing people are also required to take a certification exam by the BSP. If you have been a victim of misrepresentation, you can always report this to the Bank or to the BSP if you wish.

 

5. As to regulatory differences, the BSP may be stricter. They send examiners to each bank every year and they now have formed a special unit just to look into the trust department (which handles the UITFs) of the banks.

[URRABI]

to mr talley and mr dr_pepper (mister na, doctor pa)

 

thanks for the enlightenment. much appreciated.

 

another question...are mutual funds also valued using mark-to-market?

 

thanks.

urrabi

[Dr_PepPeR]

to mr talley and mr dr_pepper (mister na, doctor pa)

 

thanks for the enlightenment. much appreciated.

 

another question...are mutual funds also valued using mark-to-market?

 

thanks.

urrabi

 

Glad to be of some help sir. As far as I know mutual funds are now mark-to-market, almost a year after the BSP required this from the UITFs.

[URRABI]

i see...

 

thanks, doc!

[D. Sanchez]

It depends. First you find out what you want to achieve. Savings? For retirement? To buy something? Then how much can you invest. How long before you need to use the funds if at all? How familiar are you with the investment schemes and products? When you can give an indication to those questions, then I can offer a suggestion. Otherwise, it doesn't hurt to talk to your bank too.

 

 

Hi Doc Pepper,

 

 

Good Day!

 

I was wondering if oyu can help with my investment scheme on which ones are safer like UITF, Mutual bonds etc etc..I was watching a TV ad stocks on PSE awhile ago at Glorietta Makati. Just felt fascinated with STOCK TRADING too.

 

UITFs - about I was eavesdropping in one conversation b/w a the bank manager and some of his ex-OFW clients about it, He was diverting his client of not investing in this UITFs because they have too many disadvantages too.

 

I already put the little saving on buying a 2 condo studio units in U-belt which far a sound investment in real estate.

[Dr_PepPeR]

Hi Doc Pepper,

Good Day!

 

I was wondering if oyu can help with my investment scheme on which ones are safer like UITF, Mutual bonds etc etc..I was watching a TV ad stocks on PSE awhile ago at Glorietta Makati. Just felt fascinated with STOCK TRADING too.

 

UITFs - about I was eavesdropping in one conversation b/w a the bank manager and some of his ex-OFW clients about it, He was diverting his client of not investing in this UITFs because they have too many disadvantages too.

 

I already put the little saving on buying a 2 condo studio units in U-belt which far a sound investment in real estate.

 

Hey Doc, it does seem that you already have decided on what to invest in, namely those two condo units. You still have something left over? I have problems discussing generalizations, like a 'safe' investment. Safe as to what? How much risk is considered safe for you? What I've been trying to tell everybody is that investing depends on your own parameters. 'Safe' is relative. If you wish, let's have coffee and talk about it. I can only answer specific questions on the board. I'm too lazy to type.

[misterbig7]

hi doc, sorry if i didn't back read for lack of time..

 

is there a benchmark for returns for your uitf's..a 6% to 10% roi would be nice.

 

also, do you give commissions for referrals?

 

thanks!

[Dr_PepPeR]

hi doc, sorry if i didn't back read for lack of time..

 

is there a benchmark for returns for your uitf's..a 6% to 10% roi would be nice.

 

also, do you give commissions for referrals?

 

thanks!

 

I don't have 'my' UITFs, most of the UITFs are being managed by banks. There are several and different types of UITFs being offered, with big banks usually having several types to cover different types of investment objectives. The benchmarks for different UITFs depends on their asset composition, with fixed income funds usually having MART1 plus spread for a benchmark. For equity funds, they usually use the PHISIX as their benchmark. The object of most fund managers is to outperform the regular investment vehicles so the benchmark is also a moving benchmark. For fixed income funds, at this time a 6-8% p.a. ROI is the norm, and a lot higher for equity or balanced funds.

 

Normally UITFs do not give commissions but I heard that Mutual Funds gives commissions to agents.

[Talley]

I don't have 'my' UITFs, most of the UITFs are being managed by banks. There are several and different types of UITFs being offered, with big banks usually having several types to cover different types of investment objectives. The benchmarks for different UITFs depends on their asset composition, with fixed income funds usually having MART1 plus spread for a benchmark. For equity funds, they usually use the PHISIX as their benchmark. The object of most fund managers is to outperform the regular investment vehicles so the benchmark is also a moving benchmark. For fixed income funds, at this time a 6-8% p.a. ROI is the norm, and a lot higher for equity or balanced funds.

 

Normally UITFs do not give commissions but I heard that Mutual Funds gives commissions to agents.

 

Yes, the Doctor is correct in that Mutual Fund companies give commissions to licensed agents. As for referral fees, that would be between you and the particular agent. I don't think they're officially allowed to offer it though.

[misterbig7]

thanks for the heads up doc, i'll let you know if my clients are interested..

 

please feel free to send me some clients too..i do give large commissions for property referrals.

 

thanks again!