UITFs hit P26.4B end July

The total volume of newly-adapted unit investment trust fund (UITF) reached P26.38 billion end July this year, more than half of which are investments in US dollar-denominated instruments.

Of the total UITF volume, P16.4 billion are US dollar denominated funds, and roughly P9.9 billion in peso-denominated funds.

The UITF replaces the common trust fund (CTFs) following the country’s adoption of international accounting standards and valuation. UITFs are valued based on marked-to-market system over the outdated accrual method in the CTFs. It will still be managed by the trust departments of banks and non-banking institutions with trust licenses. Existing CTFs will be allowed to mature but no new accounts under the CTFs will be entertained.

Total assets under management (AUM) of the trust departments are estimated to be valued at over P700 billion end 2004. Aside from UITFs, CTFs, trust departments also manage other fiduciary assets and investment funds managed accounts (IFMAs) such as pre-need trust funds.

Rafael G. Ayuste Jr., president of the Trust Officers Association of the Philippines (TOAP) said there are 56 UITFs in the market managed by 16 trust groups.

"Ten more are in the pipeline awaiting approval by the Bangko Sentral ng Pilipinas (BSP)," Ayuste, also first vice president of the trust banking group of the Metropolitan Bank and Trust Co. (Metrobank), said.

Of the total UITFs, three UITFs are tax-exempt accounts mainly in schools and foundations. Another 23 UITFs are in peso fixed income funds, eight in mixed or balance funds, seven in dollar fund, and seven in dollar equity funds.

There are still 59 active CTFs while 18 had already been converted.

The UITFs can be accessed with a minimum initial investment for as low as P5,000 depending on the type of fund and the institution.

The introduction of the UITF triggers direct competition with mutual funds in terms of initial investment amounts and type of investment fund. Mutual funds are managed by asset management companies most of which are allied with non-bank financial institutions and insurance companies.

One major difference is that banks rely on its branch network to market its products while mutual funds rely on its agency force. But both sectors basically tap the same limited investment instruments domestically.

Trust department of banks have been accessing unlimited overseas investment while mutual funds have only this year been given the go signal by regulators to initiate the same. – Ted Torres