Unit Investment Trust Funds (uitf)

[CodenameV]

I tried both Metrobank and BDO. During May, i had to pullout from the Metrobank starter fund since there was no clear explanation for the sudden decline in NAV. It has since recovered to its peak value. However, my place of work is far from Ortigas and Makati so I can't really deal with their Trust people directly. The branch personnel can't really provide the weekly information updates on the developments and breakdown of where the trust fund is currently invested (either FXTN's, bank placements, stocks, etc.)

 

In BDO, I have placements in their $MMF which was not affected by the May decline which mostly struck bond based trust funds. I've since had placements in $BF and PBF which have done relatively well for the past month. I also appreciate the weekly updates i get through email.

[Dr_PepPeR]

I tried both Metrobank and BDO. During May, i had to pullout from the Metrobank starter fund since there was no clear explanation for the sudden decline in NAV. It has since recovered to its peak value. However, my place of work is far from Ortigas and Makati so I can't really deal with their Trust people directly. The branch personnel can't really provide the weekly information updates on the developments and breakdown of where the trust fund is currently invested (either FXTN's, bank placements, stocks, etc.)

 

In BDO, I have placements in their $MMF which was not affected by the May decline which mostly struck bond based trust funds. I've since had placements in $BF and PBF which have done relatively well for the past month. I also appreciate the weekly updates i get through email.

 

Thank you for sharing your experiences sir. Sometimes it is also a matter of how your branch services you. Unfortunately, branch service has nothing to do with NAVPUs.

[CodenameV]

I don't really place much importance in branch services as UITF's are a complicated investment product. What i value is transparency, availablity of information & analysis and flexibility. BDO's UITF's are flexible as they have different products according to your risk preference and currency. From my experience, Metrobank does not have that flexibility and transparency.

[Dr_PepPeR]

I don't really place much importance in branch services as UITF's are a complicated investment product. What i value is transparency, availablity of information & analysis and flexibility. BDO's UITF's are flexible as they have different products according to your risk preference and currency. From my experience, Metrobank does not have that flexibility and transparency.

 

Thank you for your insights. Metrobank used to be #1 in terms of CTF/UITF products. Not surprising based on their client demographics since CTF/UITFs are personal (individual) products rather than corporate, and most of the CTF/UITF are of chinese descent. These clients normally place their money based on trust of the branch manager/area head which was my basis for saying that branch service is the criterion for some people.

 

If I may ask a question, are you able to deal directly with BDO's Trust Department?

 

One more suggestion. If your funds are sizeable enough, something like Php 5MM or more, think about opening a Living Trust Account wherein you can customize the investments and the disposition of the fund, you get an account officer to deal with and the possibility of getting tax-exempt rates if you keep the investments for more than five (5) years.

[CodenameV]

Dr. Pepper,

I am sure you know more about UITF's than I do since I only started going into trust related investment products this year. Just sharing my experience and some lessons i have learned. I have talked to BDO's trust department before and they also send me a weekly update on the performance of the various UITF's as well as an economic outlook. Since I want to have some sort of control over my investments and somewhat educated in investment management, I tend to handle my investments directly rather than rely on the advice of branch managers. I actually diversify my portfolio into UITF's, stocks and time deposits.

 

One of my colleagues in the office was the one who was advising me to go into UITF's and actually recommended HSBC to me. Since there is no HSBC branch near my place of work, I could only choose Metrobank and BDO. Also, he has had bad experiences in dealing with Citibank's trust department so they're also not recommended.

[Dr_PepPeR]

Dr. Pepper,

I am sure you know more about UITF's than I do since I only started going into trust related investment products this year. Just sharing my experience and some lessons i have learned. I have talked to BDO's trust department before and they also send me a weekly update on the performance of the various UITF's as well as an economic outlook. Since I want to have some sort of control over my investments and somewhat educated in investment management, I tend to handle my investments directly rather than rely on the advice of branch managers. I actually diversify my portfolio into UITF's, stocks and time deposits.

 

One of my colleagues in the office was the one who was advising me to go into UITF's and actually recommended HSBC to me. Since there is no HSBC branch near my place of work, I could only choose Metrobank and BDO. Also, he has had bad experiences in dealing with Citibank's trust department so they're also not recommended.

 

Please, I meant it when I said I'm glad that you chose to share your experiences here. You are quite correct in dealing directly with their trust department and I am also happy that BDO's trust department chose to deal directly with you. Sadly that is not the case with Metrobank, whose attitude is that the UITF subscribers are branch clients and not trust clients.

 

Hope to see you around more often and good luck with your investments.

Edited October 4, 2006 by Dr_PepPeR

[pabling]

sunog ako sa BPI. 125k

[Dr_PepPeR]

sunog ako sa BPI. 125k

 

Did you redeem your subscription? If you haven't, then it is merely a paper loss. You will only realize the loss the moment you redeem or withdraw your participation. If not, then just leave it there until the NAVPU gives you back your principal at the least or even a small return.

[Rastamataz]

Good morning sirs, I'm virtually an alien to this so I was hoping if you could give any sort of advice regarding investing money...

 

How much usually is invested?

Are there fixed investment rates?

What are these usually?

What bank or institution would you recommend for beginners?

What can you say regarding this kind of investing vs. investing in the form of a business?

 

Thanks in advance and good day!

[Dr_PepPeR]

Good morning sirs, I'm virtually an alien to this so I was hoping if you could give any sort of advice regarding investing money...

 

How much usually is invested?

Are there fixed investment rates?

What are these usually?

What bank or institution would you recommend for beginners?

What can you say regarding this kind of investing vs. investing in the form of a business?

 

Thanks in advance and good day!

 

1. It depends on you. Some UITFs can be subscribed to for as little as Php 5K, and there are some whose minimum is Php 100K so it's just a matter of which UITF/Bank you go to.

 

2. While the UITF can invest in fixed income outlets, there are no fixed investment rates because of the mark-to-market regime mandated in UITFs. This means that everyday the assets, whether fixed income or equities, change prices everyday, so that there is no way to give a fixed rate which is simply PxRxT while with mark-to-market, you have to factor in the gain or loss according to the prevailing market prices.

 

3. Fixed income investments are normally government securities, bond issuances, special savings and time deposits.

 

4. Go to a branch you are familiar with and ask about their UITF. If you are not satisfied with what thay are telling you, just go to another branch or bank until you find one you're comfortable with.

 

5. Investing in UITF is really long-term so if you want to make a quick turnaround, it might be better if you go into a business.

[Rastamataz]

Okay thanks! These cleared up a lot of things for me

[teban]

doc pepper i'd like to add some questions:

 

since the UITF is said to be a long term investment, would it be better to invest in Peso currency or in US Dollar currency?

 

would it also be better rather than those financial investment / insurances being offered by insurance companies like sunlife, philam etc?

[Dr_PepPeR]

doc pepper i'd like to add some questions:

 

since the UITF is said to be a long term investment, would it be better to invest in Peso currency or in US Dollar currency?

 

would it also be better rather than those financial investment / insurances being offered by insurance companies like sunlife, philam etc?

 

When I say long term, I usually mean one year or more. Traditionally, Philippine Pesos is able to generate higher interest rates than US$, so long term, I suggest you invest in Philippine Pesos, if all you're after is higher interest income.

 

I believe UITFs are better than financial products being offered by the insurance companies because there are a lot more charges tucked in the insurance companies products like marketing costs, unlike a UITF which has only the trust fee. Even the insurance companies let banks (who manage their own UITFs) manage their funds too, so the management fee of the bank is passed and added to the fee that the insurance companies charge their clients. Finally, UITFs are supervised and overseen by the Bangko Sentral ng Pilipinas, while the watchdog of the Insurance companies is the Insurance Commission and for the mutual funds it is the Securities and Exchange Commission. Which agency do you think knows more about how money works?

[parbust3r]

 

One more suggestion. If your funds are sizeable enough, something like Php 5MM or more, think about opening a Living Trust Account wherein you can customize the investments and the disposition of the fund, you get an account officer to deal with and the possibility of getting tax-exempt rates if you keep the investments for more than five (5) years.

 

 

Will it be possible for you to elaborate more on this. Im definitely interested. ive got funds spread in several mutual funds and a couple of UITF's.

Do you mind me asking how you are so knowledgeable about these investments? Id love to pick that brain of yours to maximize my investments.

thanks for all the help Dr Pepper.

[Dr_PepPeR]

Will it be possible for you to elaborate more on this. Im definitely interested. ive got funds spread in several mutual funds and a couple of UITF's.

Do you mind me asking how you are so knowledgeable about these investments? Id love to pick that brain of yours to maximize my investments.

thanks for all the help Dr Pepper.

 

Sure, what exactly do you want to know?

 

I suggested a living trust arrangement for larger amounts of investible funds for the following reasons:

 

1. You can direct the investments in a living trust. You can take as much as an active or passive role in the management of the account whereas in a UITF, the Investment Manager calls the shots.

2. You can designate beneficiaries in a living trust, meaning that in case something happens to you, you can direct the trust to pay the proceeds to your designated heirs. The disadvantage of this is that the bank will subject the proceeds to estate taxes.

3. You can amend the terms and the investment guidelines anytime and withdraw or contribute anytime, via instruction letters.

4. You get your own account officer/portfolio officer who reports and liases with you.

5. If you keep your investment account for 5 years, the income is tax-exempt.

 

I've been in the trust business for as long as I remember. Just ask away sir.

[Mandrake]

When I say long term, I usually mean one year or more. Traditionally, Philippine Pesos is able to generate higher interest rates than US$, so long term, I suggest you invest in Philippine Pesos, if all you're after is higher interest income.

 

Dr. Pepper: How much investment in a UITF suffice to generate a fixed income of at least P20thousand a month for a year or 2? Is it possible to get a rate that is locked for say 1 year so that one is able to get a fixed income? Thanks.

[Dr_PepPeR]

Dr. Pepper: How much investment in a UITF suffice to generate a fixed income of at least P20thousand a month for a year or 2? Is it possible to get a rate that is locked for say 1 year so that one is able to get a fixed income? Thanks.

 

No one can give you the assurance that a UITF will generate you a fixed income of at least P20K a month. This is simply because of the characteristics of a UITF scheme. Let me enumerate them.

 

1. Unlike an ordinary deposit, realizing income on a UITF means redeeming (terminating) your certificate and putting back the principal in the UITF. So you would have to do this every month which may not be possible since some UITFs have holding periods of more than one month. Then there is the hassle of going back every month to redeem and subscribe.

 

2. The mark-to-market scheme required by the BSP for UITFs makes it difficult to manage an regular income stream. It would have been possible in an accrual method but not for M to M. And you will hardly find an investment manager that s willing to commit his ass on rates for 1 year, unless he gets you a fixed income instrument that he will hold unto until maturity of the paper.

 

If your objective is realizing 20K a month, I suggest just doing a time deposit or money market or GS. Assuming a rate of 6% p.a. (a bit high), you would need about P300K. That is because you can compute what the income is based on the interest rate. Under an accrual system, this is exactly what is being done. For mark-to-market, you factor in the accrued interest plus the market price of the security.

[dpa_009]

doc pepper, i'm planning to invest a small amount of cash 50k to 100k. I'm just not sure where to put my investment, i'm choosing from either the UITF or a mutual fund? can you give the pros and cons for both choices? appreciate your help. thanks so much!

[parbust3r]

Sure, what exactly do you want to know?

 

I suggested a living trust arrangement for larger amounts of investible funds for the following reasons:

 

1. You can direct the investments in a living trust. You can take as much as an active or passive role in the management of the account whereas in a UITF, the Investment Manager calls the shots.

2. You can designate beneficiaries in a living trust, meaning that in case something happens to you, you can direct the trust to pay the proceeds to your designated heirs. The disadvantage of this is that the bank will subject the proceeds to estate taxes.

3. You can amend the terms and the investment guidelines anytime and withdraw or contribute anytime, via instruction letters.

4. You get your own account officer/portfolio officer who reports and liases with you.

5. If you keep your investment account for 5 years, the income is tax-exempt.

 

I've been in the trust business for as long as I remember. Just ask away sir.

 

 

thanks sir. for one, i have no knowledge of trading in stocks and bonds. Im investing in UITFs and equity mutual funds for preservation of capital and a little profit. Im in it for the long term meaning more than 5 years.

Im very much concerned about my estate if and when death occurs though. Id like to avoid estate and any other taxes that heirs may have to pay. Can you advise sir?

I see you frequent places in Makati. We can meet up in any place here and afterwards maybe a cup of coffee.

Let me know sir.

[parbust3r]

If your objective is realizing 20K a month, I suggest just doing a time deposit or money market or GS. Assuming a rate of 6% p.a. (a bit high), you would need about P300K. That is because you can compute what the income is based on the interest rate. Under an accrual system, this is exactly what is being done. For mark-to-market, you factor in the accrued interest plus the market price of the security.[/b][/color]

 

 

correct me if im mistaken but i think you would need 3,000,000 instead of 300,000 to earn P20,000 at 6% p.a. tax free.

[parbust3r]

Sorry, it would take P4,000,000 at 6% p.a. to net P20k monthly.

[Dr_PepPeR]

doc pepper, i'm planning to invest a small amount of cash 50k to 100k. I'm just not sure where to put my investment, i'm choosing from either the UITF or a mutual fund? can you give the pros and cons for both choices? appreciate your help. thanks so much!

 

My personal choice is UITF. For one, the fees are smaller. A MF have to set up a corporation, pay for commissions, advertising, operations etc while a bank just uses its existing resources and just charges a management fee. MFs are regulated by the SEC while UITFs are regulated by the Central Bank. Which agency knows more about investments? Finally, most MFs also let the banks manage their funds, so why go through an intermediary when you can go direct. Bottom line is, what do you get for your investments?

 

thanks sir. for one, i have no knowledge of trading in stocks and bonds. Im investing in UITFs and equity mutual funds for preservation of capital and a little profit. Im in it for the long term meaning more than 5 years.

Im very much concerned about my estate if and when death occurs though. Id like to avoid estate and any other taxes that heirs may have to pay. Can you advise sir?

I see you frequent places in Makati. We can meet up in any place here and afterwards maybe a cup of coffee.

Let me know sir.

 

If you have a five year investment horizon, I suggest opening a trust account. You can tailor fit the investment outlets depending on the availability when you open. Than there is also the tax-exempt status if you hold onto it for 5 years. For estate tax concerns, just make it a joint trust account with a survivor clause. Yes, I can meet you in Makati after work for a cup of coffee. I'll try to get in touch when I pass by that area.

 

Sorry, it would take P4,000,000 at 6% p.a. to net P20k monthly.

 

You're quite correct. Please forgive me my lack of math skills.

[qrv777]

My personal choice is UITF. For one, the fees are smaller. A MF have to set up a corporation, pay for commissions, advertising, operations etc while a bank just uses its existing resources and just charges a management fee. MFs are regulated by the SEC while UITFs are regulated by the Central Bank. Which agency knows more about investments? Finally, most MFs also let the banks manage their funds, so why go through an intermediary when you can go direct. Bottom line is, what do you get for your investments?

If you have a five year investment horizon, I suggest opening a trust account. You can tailor fit the investment outlets depending on the availability when you open. Than there is also the tax-exempt status if you hold onto it for 5 years. For estate tax concerns, just make it a joint trust account with a survivor clause. Yes, I can meet you in Makati after work for a cup of coffee. I'll try to get in touch when I pass by that area.

You're quite correct. Please forgive me my lack of math skills.

 

dr_pepper: among the UITF option sa BDO, ano ang ok na ngayon? Presently, I have two UITF ng BDO, PMMF and DMMF... Ok na ba ang peso bond fund or fixed income?

[Dr_PepPeR]

dr_pepper: among the UITF option sa BDO, ano ang ok na ngayon? Presently, I have two UITF ng BDO, PMMF and DMMF... Ok na ba ang peso bond fund or fixed income?

 

Different UITFs are available in large banks to cater to different client investment horizons, risk appetites, investment objectives and familiarity with investment instruments. When you can profile yourself based on the said criteria, then it will be easier to recommend which of the BDO UITFs would be OK for you. Incidentally, the Peso and US Dollar UITFs are entirely different creatures.

[CodenameV]

Dr. Pepper is right. You have to first specify your priorities with regards to your objectives with regards to your investments. the $ and P MMF are for risk adverse/conservative investors who are more concerned for capital preservation and long term appreciation. Proof of that happened last May when other UITF's NAV values went down while the $MMF was unaffected and still exhibited some growth. However, its growth increments are far less than the other UITF's in BDO's stable. The P BF was heavily affected by last May's heavy withdrawals but has exhibited increasing growth in NAV values for the past 2 months.