Bpi Unit Investment Trust Funds: What Are They?

Unit Investment Trust Funds (UITFs) are a type of investment vehicle offered by banks that allow individuals to invest in a variety of financial instruments, such as corporate and government bonds, money markets, and equities. UITFs are similar to mutual funds in that they pool money from multiple investors to invest in various instruments, but UITFs are sold and managed by commercial banks. The value of a UITF is known as the Net Asset Value per Unit (NAVPU), which reflects the current market prices of the underlying instruments. As of October 31, 2024, BPI, a leading provider of financial services in the Philippines, offers a range of UITFs, including equity index tracker funds, bond funds, money market funds, and feeder funds, providing individuals with diverse investment options to meet their financial goals.

How to start investing with P10,000

Unit Investment Trust Funds (UITFs) are open-ended trust funds that can be invested or withdrawn at any time, subject to guidelines based on the bank's declaration of trust. BPI, or the Bank of the Philippine Islands, is one of the banks that offer UITFs.

Assess your risk appetite and financial goals

Before investing, it is important to understand your risk tolerance and what you want to achieve financially. Are you comfortable with taking on more risk for potentially higher returns, or would you prefer a more conservative approach? Do you want to invest for the short or long term? Knowing your risk appetite and financial goals will help you determine the best investment options for you.

Explore different investment options

There are several investment options available in the Philippines that you can start with P10,000 or less. Here are some options to consider:

• Mutual Funds: These are similar to UITFs as they are also pooled investment funds managed by professionals. However, mutual funds are offered by companies regulated by the Securities and Exchange Commission (SEC) and usually have a higher minimum initial investment amount of ₱5,000. You can make additional investments for as low as ₱1,000.
• Stock Market: Investing in the stock market means buying shares of a publicly listed company and becoming a part-owner. The largest stocks in the Philippine stock market have generated an average annual return of 8% over the past 16 years. You can open a stock trading account with a minimum investment of ₱1,000.
• Time Deposits: Time deposits are a safe and stable investment option, as they are insured by the Philippine Deposit Insurance Corporation (PDIC). They offer fixed interest rates that are higher than regular savings accounts, and the lock-in period can vary depending on your preference.
• Pag-IBIG MP2 Savings Program: This is a budget-friendly investment option offered by the government. You can start investing with as little as ₱500 a month and enjoy government-guaranteed savings and annual dividends with rates ranging from 4% to 8%.

Research and compare different investment platforms

When you have decided on the type of investment you want to make, it is important to research and compare different investment platforms or brokers. Consider factors such as fees, user-friendliness, research capabilities, and the minimum amount required. Read reviews and look for platforms that offer educational resources and expert recommendations to help you make informed investment decisions.

Open an account and fund your investment

Once you have chosen an investment platform, follow their instructions to open an account and fund your investment. This process may vary depending on the platform you choose, but it generally involves providing personal information, verifying your identity, and transferring funds.

Monitor your investments regularly

After you have made your investments, it is important to regularly monitor their performance. Keep track of news and updates related to your investments, and stay informed about any factors that may impact their value. Remember that investing carries risks, and the value of your investments may fluctuate. Regular monitoring will help you make informed decisions about buying, holding, or selling your investments.

Net Asset Values per unit (NAVPU)

A Unit Investment Trust Fund (UITF) is an investment vehicle that allows investors to pool their money into a diverse range of investments. UITFs are open-ended, meaning investors can choose when to invest and withdraw their money. The Net Asset Value per Unit (NAVPU) is a crucial metric for UITFs, as it represents the underlying value of each unit. It is calculated by subtracting the fund's expenses and liabilities from the total market value of the investment fund, and then dividing that figure by the total number of units of participation. In other words, NAVPU = (Fund Assets - Fund Liabilities) / Number of Outstanding Units.

The NAVPU is important for investors as it allows them to compare the performance of different UITFs, even if they have different prices. A significant difference between the price and NAVPU may indicate that the market believes the fund is overvalued or that better pricing is available elsewhere. The NAVPU also determines the value of an investor's UITF investment, which can be calculated by multiplying the NAVPU by the number of units of participation.

The value of the NAVPU is dynamic and changes daily based on market conditions. It varies across different funds due to the unique nature of their investments. Investors can access historical NAVPU data to gauge a fund's performance, although past performance is not a guarantee of future returns.

Overall, the NAVPU is a critical metric for investors considering UITFs as it provides insight into the value of their investment, allows for comparisons between different funds, and helps assess a fund's performance over time.

Types of funds

BPI Unit Investment Trust Funds (UITF) are a type of investment fund offered by the Bank of the Philippine Islands (BPI). They are a type of pooled fund, which means that investments from multiple investors are combined into a single fund, which is then managed by professional fund managers. This makes investing more accessible and affordable for individual investors, as it allows them to diversify their investments and access a wider range of financial assets.

There are two main types of BPI UITFs:

• Equity Funds: These are funds that primarily invest in stocks, also known as equities. Equity funds typically carry a higher level of risk compared to other types of funds, but they also offer the potential for higher returns. An example of an equity fund offered by BPI is the BPI Equity Value Fund.
• Fixed Income Funds: These funds invest in fixed-income securities, such as bonds, which provide a steady stream of interest or dividend payments. Fixed-income funds are generally considered lower risk compared to equity funds, making them suitable for investors seeking regular income and capital preservation.

Within these two main categories, BPI offers a range of specific fund options to cater to different investment goals and risk tolerances. For example, the BPI Philippine Infrastructure Equity Index Fund and the BPI Philippine Consumer Equity Index Fund are two of the UITFs that can be availed under the BPI Wealth program.

In addition to the types of funds offered, BPI also provides resources and expert financial advice to help investors make informed decisions. With a wide selection of investment products and services, BPI aims to guide its clients towards achieving their financial goals and building a stable investment portfolio.

How do mutual funds and UITFs work?

Mutual funds and Unit Investment Trust Funds (UITFs) are collective investment schemes that pool money from various investors to achieve a specific investment objective. They are similar but differ in a few aspects.

How Mutual Funds and UITFs Work

Mutual funds and UITFs are investment schemes that allow multiple investors to pool their money into a single fund. This fund is then managed by a professional investment manager, who invests it in a diversified portfolio of stocks, bonds, and other assets. The fund's profits come from the appreciation of these assets and the dividends and interest they generate. After deducting fees and expenses, these profits are passed on to the investors.

In the Philippines, mutual funds are offered by investment companies, while UITFs are bank products. Both are open-ended investment schemes, meaning investors can buy and sell shares or units at any time. However, mutual fund investors become shareholders of the investment company, while UITF investors do not become shareholders of the bank.

Advantages of Mutual Funds and UITFs

• Professional Management: Investors are relieved of the burden of asset selection and monitoring as full-time professionals make investment decisions on their behalf.
• Diversification: Combining various assets in a portfolio offers higher returns by spreading risk. The large asset base of these funds also allows access to investments not typically available to individual investors.
• Economies of Scale: Fees incurred by individual investors for purchasing and trading multiple assets are shared among all investors in the fund, reducing individual transaction costs.
• Liquidity: Shares or units of mutual funds and UITFs can be easily bought or sold at any time.
• Low Minimum Investment: In the Philippines, mutual funds can be purchased for as little as ₱5,000 per share, while UITFs require a minimum investment of ₱10,000 per unit.

Disadvantages of Mutual Funds and UITFs

• Investment Risk: Returns are not guaranteed, and losses may occur due to underperforming assets.
• Overdiversification: Some funds may invest in too many similar assets, reducing the benefits of diversification.
• Costs and Fees: Annual management fees, administration expenses, and investor relations costs can eat into profits. Mutual funds may also charge entry and exit fees. While UITFs typically don't have entry fees, they may charge an early withdrawal fee.

Points to remember before investing

Unit Investment Trust Funds (UITFs) are ready-made investments that pool funds from various investors with similar investment objectives. These funds are then invested in a variety of instruments, such as corporate and government bonds, money markets, and equities, to meet different risk profiles and investment objectives.

• Define your financial objective and risk appetite: It is crucial to understand your financial goals and how much risk you are comfortable with. This will guide you in choosing the right investment strategy and selecting a fund that aligns with your profile and needs.
• Consider a long-term investment horizon: Investing for the long term allows you to maximize your gains and benefit from compound interest over time.
• Study the investment instruments: Take the time to understand the different investment instruments in which the fund invests. Look at the allocation of the portfolio across various asset classes to gain a clear picture of your investment.
• Top up your investment: If you have additional funds, consider adding to your initial investment to help you reach your investment goals faster.
• Evaluate fees and expenses: Consider the management and transaction fees associated with the fund. These fees can impact your overall returns, so be sure to factor them into your decision-making process.
• Assess the fund manager's track record: While past performance does not guarantee future results, reviewing the fund manager's historical returns and experience can give you an idea of their capability to meet investment targets. Regular reports on fund performance should be accessible to you.
• Understand the risks: Note that UITFs are not covered by the Philippine Deposit Insurance Corporation. Even funds invested in low-risk instruments carry some level of risk. Carefully consider your risk tolerance and whether capital preservation is your primary objective.

Frequently asked questions