Investing in UITF and Mutual Funds: 5 Things You Need to Know
I’ve written about UITFs and Mutual funds before. But when it comes to investing, I don’t think you can ever be too informed. And today we have guest blogger Zarj from Security Bank to tell us the essential things about UITFs and MFs.
If you are looking for medium to long term investments, you might encounter Mutual Funds and Unit Investment Trust Funds (UITF) in your research. Both are collective investment schemes offered to investors.
Investment companies typically create a collective scheme from money pooled together from their investors and invest the fund in order to achieve a specific investment objective. Although MFs and UITFs have similarities, they have significant differences as well that may help you decide which one would be a better option for you.
Investment companies are the ones that offer mutual funds. Buying a mutual fund share means that you become a stockholder of that company and will thus have the rights of a regular stockholder. Mutual funds are managed by a full-time professional fund manager assigned by the company itself.
UITFs, on the other hand, are offered by banks. However, they are not considered deposit products and are not covered by the Philippine Deposit Insurance Corporation (PDIC). Instead of shares, you buy investment units. Unlike mutual funds, UITFs are managed by the Trust Group of the bank.
Both are open-ended funds.
Being open-ended means that both of these funds are redeemable, which makes buying and withdrawing units or shares easy. Should an investor wish to withdraw his funds from a UITF, all he has to do is go to the bank to request for it. Similarly, mutual fund investors have the option to sell their shares either back to the fund or to a broker.
Both are measured by their current net asset value.
The current Net Asset Value (NAV) is used to measure the price of both a mutual fund share, called NAVPS (Net Asset Value per Share) and a UITF unit, known as the NAVPU (Net Asset Value per Unit). The Net Asset Value (NAV) is computed by getting the difference between the funds’ assets minus its total liabilities. The price per unit or share is then derived by dividing the NAV by the number of units or shares.
They’re charged different types of fees.
An outright expense, or entry fee, is normally charged when opening a mutual fund account. Exit fees are also charged when redeeming shares. With UITFs, there are no entry or exit fees charged. Instead, a certain percentage of the investment amount will be charged as payment for a trust or management fee.
They’re regulated by different regulatory bodies.
Mutual fund companies are governed by the Investment Company Act of the Philippines and are regulated by the Securities and Exchange Commission (SEC). On the other hand, there are no specific laws that govern UTIFs. However, since they are bank products, they still fall under Philippine banking laws and are regulated by the Bangko Sentral ng Pilipinas (BSP).
Both MFs and UITFs are good investment options. However, what will work best varies per investor and would depend on his or her risk profile and investment objective. Before making an investment, it would be best to carefully read the fund’s prospects, its most recent shareholder report, and other available information to make sure you can make an informed decision.
Zarj is a digital marketing specialist with several years of experience
in social media strategy, editorial marketing and web design. Previously
involved in strategic communications, she now works for Security Bank(https://www.securitybank.