UITFs balloon to P59B

The total volume of the unit investment trust fund (UITF) reached P58.99 billion end September this year.

That is a 123-percent jump from the P26.38 billion after six months into 2005.

Of the total UITF volume, P25.9 billion are US dollar denominated funds, an almost 58 percent jump from the P16.4 billion in end June.

Peso-denominated funds grew by 233 percent, from P9.9 billion last June to P33-billion after nine months into 2005.

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 UITFs are valued based on marked-to-market system over the outdated accrual method in the CTFs.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.

CTFs must all be converted into UITFs or matured by September 2006.

Total assets under management (AUM) of the trust departments are estimated to be valued at over P707.5-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.

The Trust Officers Association of the Philippines (TOAP) said there are 65 UITFs in the market managed by 16 trust groups or institutions.

Five more UITFs are in the pipeline applied by three trust departments or institutions and awaiting approval by the Bangko Sentral ng Pilipinas (BSP).

Of the total UITFs, 12 are tax-exempt accounts mainly in schools and foundations. Another 25 UITFs are in peso fixed income funds, 10 in mixed or balance funds, 20 are dollar-denominated funds.

There are still 35 active CTFs while 18 have 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 competion 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.