Rafael G. Ayuste, senior vice president of Metropolitan Bank and Trust Co. (Metrobank) and concurrent chairman of UITF Development Council said the UITFs will perform well as the stock market remains bullish.
Early this year, yields from UITFs plunged after marked to market rules required the fund to report a decrease in market value of the holdings. As a result, a number of investors withdrew their investments.
Assets of UITFs are marked to market and as such, the funds’ net asset value per unit may fluctuate depending on market volatility. This valuation provides the investor a more accurate and fair value of his investments at any given time.
"A lot of foreign funds are actively looking at the Philippines and it should result in more participation in the equity market," Ayuste said. He stressed that there is a still room for growth particularly in the equity funds.
For the fixed income market, there is still room for interest rates to go down. "Whether the market goes up or down the fund managers of the UITFs are always on the lookout for opportunities. The fund managers take advantage of market movements to make money for the fund," Ayuste explained.
A UITF is an open-ended pooled trust fund denominated in peso or any acceptable currency. It is operated and administered by a trust entity and made available by participation. The client can invest in any or a combination of the UITFs available in the market, which are invested in various instruments such as equities, fixed-income instruments, or a combination of both.
Ayuste said there are at least 18 banks offering over 70 investment trust funds. "I’m sure the client will find one that will suit his or her needs," Ayuste said.
According Ayuste, the investment should suit the personality of the client and that goals, education, age and tolerance for risk are some of the things that must be considered before investing.
For example, Ayuste said young professionals who would like to buy their first vehicle or condominium unit in five years’ time are more likely to take in more risks. However, older people might be satisfied with low risk securities.
Ayuste stressed that UITF is a good option because the investment is liquid or easily convertible to cash.