BSP allows UITF investment in repo contracts

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has expanded the investment opportunities of fund managers of unit investment trust funds (UITFs) to include government securities-backed short-term borrowings also known as repurchase or repo agreements.

BSP Governor Amando Tetangco Jr. has issued Circular Number 675 expanding the allowable investments of UITFs after the Monetary Board (MB) approved the amendments to the guidelines.

 UITFs are pooled funds of investors with common investment goals and are managed by the trust departments of universal and commercial banks.

Tetangco stated in the circular that UITF investments could also include loans arising from repo agreements which are transacted through an exchange recognized by the Securities and Exchange Commission (SEC).

However, he clarified that the repo contracts transacted through the Philippine Dealing and Exchange Corp. (PDEX) could be pre-terminated lawfully.

The BSP chief likewise added that UITF investments could also now cover other tradable investment outlets or categories allowed by the central bank.

Tradable investment instruments include products whose quoted two-way prices are readily available and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly 

The BSP currently allows managers of UITFs to venture into government securities, savings, and time deposits.

UITFs could also be invested in foreign sovereign issues, exchange-listed securities, and tradable loans.

Tetangco said managers of UITFs could start investing in government securities-backed short-term borrowings or repo agreements within 15 days from the publication of the new circular.