Unit Investment Trust Funds (uitf)

[Dr_PepPeR]

Doc Pep,

 

Are all banks OFFER NAVPU different than their current market value? Why is this so. Please enlighthen.

 

I have tried two banks (equity funds) and their OFFER NAVPU is way higher by 2% than their current NAVPU. So in effect you are charged an additional 2%.

 

Regards

 

Let me check on this. Technically there is only one NAVPU for the day. Whether you subscribe or redeem it should always be based on the current NAVPU for the day. If there is an offer NAVPU that is different from the current NAVPU either for buying or selling, then it is a violation of the Bangko Sentral ng Pilipinas Rules. Could you at least tell me which banks you are referring to?

[bachelor25]

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[G.I.]

Let me check on this. Technically there is only one NAVPU for the day. Whether you subscribe or redeem it should always be based on the current NAVPU for the day. If there is an offer NAVPU that is different from the current NAVPU either for buying or selling, then it is a violation of the Bangko Sentral ng Pilipinas Rules. Could you at least tell me which banks you are referring to?

 

i will mention only one bank, IEBANK. If this is a violation, then i need to get back to them.

 

thanks again

[juandelacruzband]

i will mention only one bank, IEBANK. If this is a violation, then i need to get back to them.

 

thanks again

You may also want to check if you have an exit fee (held for less than 2 years) for your UITF. Maybe that could account for the "additional charge."

[G.I.]

You may also want to check if you have an exit fee (held for less than 2 years) for your UITF. Maybe that could account for the "additional charge."

nope. you may want to check their website ibank.com.ph where they post their BID and OFFER NAVPUs

[Dr_PepPeR]

i will mention only one bank, IEBANK. If this is a violation, then i need to get back to them.

 

thanks again

 

I took a look at iBank's webpage and went to see their Large Cap Philippine Equity Portfolio UITF. Their pricing is stated below verbatim:

 

Pricing Method: Dual Pricing. Investors will purchase units at the OFFER NAV and sell units at the BID NAV

 

So you are correct, there seems to be different NAVs for purchasing and selling units. I then took a look at their Declaration of Trust which is also online and I found this provision:

 

ADMISSION AND REDEMPTION (Art. III)

A. Participations may be accepted on any banking day subject to a 12:00 noon cut-off time. The cut-off time may be

amended by the TRUSTEE upon which all branches distributing the said Unit Investment Trust Fund will be advised.

B. Initial and subsequent participations are subject to a minimum holding period of NINETY (90) days. Redemptions

before the end of the holding period will be subject to an early redemption fee of 0.25% flat on the equivalent amount

of the redemption or FIVE HUNDRED PESOS (PHP 500.00), whichever is higher.

C. Redemption requests may be accepted on any banking day subject to a 12:00 noon cut-off time. Proceeds of

redemption requests received before the said cut-off shall be credited to the client’s designated account FOUR (4)

banking days after receipt of such request.

D. Admission and redemption will be based on the NAVpu for the particular banking day. The NAVpu shall be based on

the prevailing market value of underlying investments of the Fund at that time. Valuation shall be done in accordance

with market convention on marking-to-market of securities.

E. Participation and redemption shall be paid in Philippine Pesos.

 

My comment is this. The Declaration of Trust does not mention that their NAV will be computed differently for subscriptions and redemptions. If there has been no amendment of the Declaration of Trust approved by the BSP, then to me it looks like a violation, since there is no mention of dual pricing there. It is misleading to the general public who will rely on the published NAVPUs. But that is just my opinion. You might be in a better position to ask iBank why they are doing it this way.

[labadabdab]

You should try East West UITF. Personal testimonial ito, mahusay service, tapos updated rates/NAVPU nila sa webpage ng bank.

 

:thumbsupsmiley:

[bachelor25]

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[CodenameV]

IEBank's 90 day holding period are quite long. Banks like BDO allow you to withdraw your funds after a holding period of only 30 days.

[Dr_PepPeR]

IEBank's 90 day holding period are quite long. Banks like BDO allow you to withdraw your funds after a holding period of only 30 days.

 

Holding periods really vary among UITFs. Some banks have now scaled back their holding period to 30 days. For UITFs with long term horizons (more than 3 years) or for equity/balanced funds the holding period is normally 90 days.

[tombone]

UITF of ING holding is 15 day but there should be a buffer fund that hold on for half a year, the rest can be move with in 15 day

[anarkista]

Hi, Guys, nngayon lang ako nakabalik dito.

 

Doc Pepper or anyone in the forum,

 

I read somewhere (here I guess) that BSP does allow banks to provide guarantee into someone's investment, i.e., if after the holding period (or anytime actually), and the NAVPU went down, then, you have to live with that. My question is why do they prohibit that? What if, to attract more clients, the bank can guarantee a no-loss-of-investment as soon as holding period is met? What if the bank is willing to shoulder the possible loss of your investment in exchange for it having more clients? I don't know if my question is making sense at all...

 

Thanks!

[Dr_PepPeR]

Hi, Guys, nngayon lang ako nakabalik dito.

 

Doc Pepper or anyone in the forum,

 

I read somewhere (here I guess) that BSP does allow banks to provide guarantee into someone's investment, i.e., if after the holding period (or anytime actually), and the NAVPU went down, then, you have to live with that. My question is why do they prohibit that? What if, to attract more clients, the bank can guarantee a no-loss-of-investment as soon as holding period is met? What if the bank is willing to shoulder the possible loss of your investment in exchange for it having more clients? I don't know if my question is making sense at all...

 

Thanks!

 

UITFs like any other trust product, are mandated by the BSP that they are absolutely not allowed to guarantee rates. This means neither income nor principal are guaranteed. This is to differentiate them from a traditional bank product that offers fixed rate, but of course, relatively lower potential returns. UITFs are supposed to be more of an investment, and therefore subject to the risks attendant to it, as opposed to a bank deposit, which is primarily for savings. So trust products are for specific types of clients, those who are sophisticated enough to understand and live with the risks attendant to higher yields and have the 'risk' funds for this. UITFs have no reserves, no PDIC coverage and of course no guaranty of return but it also offers potentially better yields. A bank cannot shoulder the possible loss since then it would be deemed to be an insurer.

 

Well, those are the rationales for the non-guaranty of income or principal. Trust departments are absolutely prohibited from doing so, especially in UITFs, where they are supposed to explain this properly to a client.

 

Your question sir does make sense. It's just that banks are simply not allowed to do it.

Edited October 8, 2007 by Dr_PepPeR

[anarkista]

Thanks, Doc Pepper. As usual, you have been of great help. This question is really part of a bigger concern. I am currently investing in the stock market. (By the way, your UITF thread has been very helpful to me since last year when I started with equity funds of BPI.) I have 3 friends who are investing with me. Our arrangement is that I will invest our money, and I get a certain percentage of the profit but I will not share any losses. I am actually a bit OK here. This is an informal arrangement among the four of us. And so far, we are OK with that arrangement. Before the end of the year, I would like to make everyhting legally binding. A contract will be signed saying so and so. I will look into that later.

 

My next question is what if I am willing to ask some potential clients, say former colleagues, classmates, or relatives, to join me in this investment. I alreay have a design on how I should go with this. Now, I am ok with the present arrangement that I have -- that I get a certain percentage of profit, and I will not share any possible loss. There is no "lockup" period because I would not share any loss anyway. Now, this might be attractive to some if they can take risk. However, for those who are a bit risk-averse, the stock market is a no-no. To convince potential clients, is it legal for me as an individual person (as against bank instuitutions that are covered by your reply above) to draft a legal contract offering an arrangement that will guarantee their investment as long as they maintain their investment for a certain lockup period? The way I see this, this is similar to asking for a loan and making a guaranteed payment over a certain period of time. The only difference is that the interest may vary from 0% to a higher interest rate. Payment is still guaranteed. In exchange for this guarantee, they have to maintain that investment with me for, say, 1 or 2 years, and a higher percentage for me if there is profit.

 

I hope I am not taking much of your time, Doc Pepper.

[Dr_PepPeR]

Thanks, Doc Pepper. As usual, you have been of great help. This question is really part of a bigger concern. I am currently investing in the stock market. (By the way, your UITF thread has been very helpful to me since last year when I started with equity funds of BPI.) I have 3 friends who are investing with me. Our arrangement is that I will invest our money, and I get a certain percentage of the profit but I will not share any losses. I am actually a bit OK here. This is an informal arrangement among the four of us. And so far, we are OK with that arrangement. Before the end of the year, I would like to make everyhting legally binding. A contract will be signed saying so and so. I will look into that later.

 

My next question is what if I am willing to ask some potential clients, say former colleagues, classmates, or relatives, to join me in this investment. I alreay have a design on how I should go with this. Now, I am ok with the present arrangement that I have -- that I get a certain percentage of profit, and I will not share any possible loss. There is no "lockup" period because I would not share any loss anyway. Now, this might be attractive to some if they can take risk. However, for those who are a bit risk-averse, the stock market is a no-no. To convince potential clients, is it legal for me as an individual person (as against bank instuitutions that are covered by your reply above) to draft a legal contract offering an arrangement that will guarantee their investment as long as they maintain their investment for a certain lockup period? The way I see this, this is similar to asking for a loan and making a guaranteed payment over a certain period of time. The only difference is that the interest may vary from 0% to a higher interest rate. Payment is still guaranteed. In exchange for this guarantee, they have to maintain that investment with me for, say, 1 or 2 years, and a higher percentage for me if there is profit.

 

I hope I am not taking much of your time, Doc Pepper.

 

If you are asking if this is all legal, it would seem so. Remember that the BSP rules cover only banks, investment houses and quasi banks. As an individual, you are free to contract with other individuals provided it is not contrary to law, morals, public order etc etc. If they agree to your terms, then you can stipulate what you want. Hope this helps.